While private sector wages grew at the slowest rate in three and a half years, US labour costs increased moderately in the second quarter. This further evidence that inflation was firmly on the downward trend could pave the way for an interest rate cut in September.
The Labour Department’s report, which was released on Wednesday, came after data released last week revealed that, for the most part, last quarter’s inflation was below 3% across the board. As the labour market continues to loosen, labour costs should continue to decline.
Federal Reserve officials are expected to applaud the slight increase in labour costs as they conclude a two-day policy meeting on Wednesday. The US central bank is anticipated to maintain its benchmark overnight interest rate, which has been in the 5.25%–5.50% range since July of last year.
The private sector is seeing wage and salary increases more in line with what the Federal Reserve would prefer to see, according to Christopher Rupkey, chief economist at FWDBONDS in New York. The state of the economy is progressively improving. Cooler wages approve Fed rate cuts. The Bureau of Labour Statistics of the Labour Department reported that the employment cost index (ECI), the most comprehensive indicator of labour costs, rose by 0.9% in the most recent quarter following an unrevised 1.2% increase in the first quarter.
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