Powell Needs to Put on His Hawk Costume and Snarl
The Fed chair’s performance will be more important than 25 basis points to a market pushing back ever harder against higher rates.
Will markets be convinced?
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For something that never used to attract much attention, the employment cost index is turning into a reliable star of the market. That’s because the ECI, a broad gauge of wages and benefits, is the Federal Reserve’s preferred measure of workers’ pay, and it’s thus become a key indicator of inflationary pressure. A nasty surprise from the index in the third quarter of 2021 shifted the Fed’s thinking, and also knocked the market; and so Tuesday’s news that the ECI increased only 1% in the fourth quarter at a slower-than-expected pace was a pleasant surprise for a change. It reinforced the stance of those who believe inflation is, indeed, moderating: