New data: Inflation pressure stayed high in late 2021
Add Axios as your preferred source to
see more of our stories on Google.
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.
