Fed slows rate hikes, signals more are coming
The Federal Reserve slowed its drive to rein in inflation and said further interestrate hikes are in store as officials debate when to end their most aggressive tightening of credit in four decades.
Chair Jerome Powell and fellow policymakers lifted the Fed's target for its benchmark rate by a quarter percentage point to a range of 4.5% to 4.75%. The smaller move followed a half-point increase in December and four jumbo-sized 0.75 point hikes prior to that.
Powell said at his post-meeting news conference that policy will need to remain restrictive “for some time” and that officials would need “substantially more evidence” to be confident that inflation was on track to decline to the Fed's 2% target.
The unanimous decision by the Federal Open Market Committee was in line with financial market expectations.
In a sign that the end of the hiking cycle may be in sight, the committee said the “extent of future increases” in rates will depend on a number of factors including cumulative tightening of monetary policy. It had previously tied the “pace” of future increases to those factors.
In another shift from its last statement, the Fed noted that inflation “has eased somewhat but remains elevated,” suggesting policymakers are growing more confident that price pressures have peaked.
Inflation tops wages in most U.S. cities, except in the L.A. region
Wage growth was easing in most U.S. cities by the end of last year and remained below the inflation rate in almost all of them, according to the latest regional pay data from the Bureau of Labor Statistics.
Southern California was one exception among major metro areas, posting an increase in wages and salaries for 2022 that was faster than the rise in local consumer prices.
New BLS data for December, published Tuesday, shows wage growth easing almost across the country, including in cities like Miami, Phoenix and Atlanta, which have been hotspots for both pay and inflation. Wages in those places are still growing faster than in most of their peers, with Miami topping the list, but they're all lagging behind local inflation indicators.
Seattle was the only one of the 15 metro areas studied by the BLS where wage growth was still accelerating at the end of last year. It reached a record 6.2% annual pace in December, up from 2.4% in mid-2021.
Phoenix and Houston were among the cities that saw the sharpest dropoff in wage growth. In Houston, the annual rate dropped to 3.3% in December, from 6.1% in June. In Phoenix, where inflation remains far above the national average at 9.5%, wage growth has slowed to 5%.
Nationwide, wages and salaries rose 5.1% in the 12 months through December, according to the BLS. The year-end inflation rate was 6.5%.
The bureau's study measures pay in the private sector, excluding government jobs. The comparison between wages and inflation is limited to those metro areas where local consumer-price indexes for December have been published.
Jobless claims drop another week
Applications for U.S. unemployment benefits fell for the fourth time in five weeks, underscoring the broad resilience of the job market that threatens to keep inflation elevated.
Initial unemployment claims ticked down by 3,000 to 183,000 in the week ending Jan. 28, the lowest since April, Labor Department data showed Thursday.
Continuing claims, which include people who have already received unemployment benefits for a week or more, fell to 1.66 million in the week ended Jan. 21.
The labor market, while cooling at the margins, is still tight by many measures and remains one of the key hurdles in the Federal Reserve's fight against inflation. Even though payrolls growth has slowed and companies in technology and banking have laid off staff in recent months, demand for workers still far exceeds supply, which could put upward pressure on wages and broader prices.