MNI: Little Impact From Wages On Broader PCE- San Fran Fed

Wages inflation in services excluding housing, a metric closely watched by Fed Chair Jerome Powell, has made a trivial impact on wider price gains, according to a paper Tuesday from the San Francisco Fed, suggesting little reason to fear a wage-price spiral.

Recent wage gains in that part of the economy are adding just 0.1pp to core PCE inflation according to the paper from Adam Hale Shapiro, staff economist at the San Francisco Fed. That's a sliver of the 3pp rise in core PCE.

The finding is consistent with past research showing wages aren't a major inflation driver, the paper said, because firms can take other actions such as reducing profit margins or embracing automation to hold back raising prices. (MNI INTERVIEW: Companies' Contribution To US Inflation Falling) Some Fed officials have said they likely need to keep raising interest rates because there generally hasn't been enough progress bringing inflation back to target.