Q2 ECI: Inflation pressures from jobs market subsiding

Wells Fargo Research Team Wells Fargo

Summary

The second quarter Employment Cost Index offers the latest sign that the downward trend in inflation is back on track after a derailment at the start of the year. The ECI came in touch softer than expected, advancing 0.9% over the quarter, or at a 3.7% annualized rate. The second quarter's moderation leaves it closely approaching a pace consistent with the Fed's inflation goal once accounting for productivity. With the ECI the Fed's preferred barometer of labor costs growth, today's data mark an important step toward the FOMC gaining "greater confidence" that inflation is cooling sufficiently to begin reducing the fed funds rate.

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Wells Fargo Research Team

Wells Fargo

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