It’s Hard to Complain About Rising Wages, Unless You’re the Fed
Strong labor-cost data for the first quarter is good for workers, fine for inflation but not great for interest rates.
Hard to argue with higher wages.
Photographer: Kamil Krzaczynski/AFP via Getty Images
The monetary policy gods meeting this week at the Eccles building in Washington aren’t likely to find very much at all to like about the first three months of 2024. Core inflation accelerated, energy prices bounced back and financial conditions eased on the back of a strong stock market — a combination that’s unlikely to add up to Federal Reserve rate cuts anytime soon. Adding insult to injury: The gold standard of compensation measures just revealed a sequential acceleration in the first quarter, providing more ammunition to those who would argue that wage and price inflation are getting stuck at a pace that’s inconsistent with the central bank’s target.
I still doubt it, but there’s no denying that these reports will have a real impact on the near-term path of interest rates.