A measure of US core services prices that Federal Reserve officials are watching closely posted its smallest advance since July of last year.
(Bloomberg) — A measure of US core services prices that Federal Reserve officials are watching closely posted its smallest advance since July of last year.
Prices of services excluding energy services and housing costs rose 0.23% in May, according to Bloomberg calculations based on data published Friday by the Bureau of Economic Analysis. On a year-over-year basis, they were up 4.53%.
Fed Chair Jerome Powell and his colleagues at the US central bank have zeroed in on this part of the consumer-price basket, arguing that sticky prices for such services are likely to keep inflation elevated unless the job market softens.
“The place where we haven’t really seen much progress is in non-housing services,” Powell said Wednesday at a European Central Bank event in Sintra, Portugal. “That’s where we’re not seeing a lot of progress yet, and the reason is — one explanation for it is — that labor costs are really the biggest factor by far in most parts of that sector.”
“We need to see a better alignment of supply and demand in the labor market, and see more softening in labor-market conditions, so that inflationary pressures in that sector can also begin to subside,” Powell said.
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