WASHINGTON (Reuters) – U.S. labor costs increased solidly in the third quarter amid strong wage growth, the latest indication that the Federal Reserve could keep interest rates higher for some time.
The Employment Cost Index, the broadest measure of labor costs, rose 1.1% last quarter after increasing 1.0% in the April-June period, the Labor Department said on Tuesday.
Economists polled by Reuters had forecast the ECI rising 1.0%. Labor costs increased 4.3% on a year-on-year basis after advancing 4.5% in the second quarter. The report followed on the heels of news last week that the economy grew at its fastest pace in nearly two years in the third quarter.
The ECI is widely viewed by policymakers and economists as one of the better measures of labor market slack and a predictor of core inflation, because it adjusts for composition and job-quality changes.
Fed officials were due to start a two-day policy meeting on Tuesday. The U.S. central bank is expected to leave interest rates unchanged on Wednesday as a recent surge in U.S. Treasury yields and stock market sell-off have tightened financial conditions. Since March 2022, the Fed has raised its policy rate by 525 basis points to the current 5.25%-5.50% range.
(Reporting by Lucia Mutikani)
