MNI: Fed Says Core Services Inflation Not Yet Easing-Report

A key measure of service sector inflation has not yet shown significant signs of easing, the Federal Reserve said Friday in its semi-annual Monetary Policy Report to Congress.

"Within core services prices, housing services inflation has been high, but the monthly changes have started to ease in recent months, consistent with the slower increases in rents for new tenants that have been observed since the second half of last year," the report said.

"For other core services, price inflation remains elevated and has not shown signs of easing, and prospects for slowing inflation may depend in part on a further easing of tight labor market conditions." (See MNI INTERVIEW: Fed 'Skip' Heralds Premature Pause-Ex-Staffer)

Fed Chair Jerome Powell will present the report to the relevant House and Senate committees in hearings next week.

The labor market remains very tight although it has shown signs of loosening recently, the Fed said.

"The supply of labor continued to improve. The labor force participation rate, which measures the share of people either working or actively seeking work, moved up, on net, during the first five months of this year," the report said.

Inflation expectations remain contained in the long-run, it added, a source of comfort for policymakers.

The Fed kept interest rates on hold this week for the first time since it started hiking back in March 2022, but officials revised up estimates for how rates might have to go in this cycle.