

Inflationary pressures remained high in the final months of last year, though not quite as high as forecasters had thought.
Driving the news: The Employment Cost Index, which tracks what employers pay in wages and benefits, rose 1% in the fourth quarter, below the 1.3% reading in the third quarter and the 1.2% analysts expected.
Meanwhile, the personal consumption expenditures price index, also released Friday morning, showed an 0.4% rise in consumer prices, in line with expectations.
Fed Chair Jerome Powell had cited a hot third-quarter reading on the ECI as a reason for the central bank's pivot toward higher interest rates, in that it suggested broad-based inflation pressure cycling through wages.
- In that sense, the softer fourth-quarter reading implies that the Fed need not move as abruptly toward tighter monetary policy as it would if the data showed a spiral of accelerating wage and price increases.
Yes but, the high PCE inflation reading shows that, so far, inflation isn't abating in a way that might give relief to consumers and give the Fed much comfort.
- Core PCE inflation, which the Fed aims to keep around 2% annually, was 0.5% in December alone, the same as in November.
- If sustained for a full year, 0.5% monthly gains would work out to 6.2% annual inflation, far above the Fed's target and high enough to cause sustained discomfort for consumers.
The bottom line: Friday's inflation data, taken together, was a little better than expected, but high inflation and the discontent it creates were still very much underway to close out 2021.