Two closely watched inflation gauges showed limited relief for the US economy from rampant price growth, keeping the Federal Reserve on course to continue its historically aggressive monetary tightening next week.
The latest employment cost index (ECI) report, which tracks employers’ spending on pay, showed total pay for civilian workers during the third quarter increased 1.2 per cent, the Bureau of Labor Statistics said on Friday. That was in line with economists forecasts and down from 1.3 per cent in the three months to June 30.
The data are of great interest to policymakers and economy watchers as strong wage growth, stemming from a robust domestic labour market, is among factors keeping overall inflation near historic highs.
In a potential sign of some easing pressure, pay growth for private industry workers slowed to 1.1 per cent in the third quarter, from a 1.5 per cent pace in the previous period.
Separately, the core personal consumption expenditures (PCE) index, rose 0.5 per cent in September, taking its annualised rate to 5.1 per cent, the US commerce department said on Friday. The core figure strips out volatile food and energy costs and is the Fed’s preferred inflation metric.
That monthly increase was in line with economists’ expectations, though annualised core PCE had been forecast to be 5.2 per cent.
Core PCE remained well above the Fed’s inflation target of 2 per cent, supporting the case for policymakers to implement a 0.75 percentage point rate increase on Wednesday at the conclusion of their two-day Federal Open Markets Committee meeting.
Headline PCE, which includes food and energy, increased by 0.3 per cent, keeping at an annualised rate of 6.2 per cent.
Economists and investors are entertaining the idea of when the Fed might consider slowing the pace of interest rate increases.
Some Fed officials have suggested the central bank should begin to prepare for a slowdown in the pace of interest rate increases, leaving economists and investors on the look out for signs of potential timing. But the wage and PCE figures, coupled with data earlier this month that showed US consumer prices remain elevated, make such a policy change unlikely in the immediate term.
