Employers are giving out smaller raises than they were last year, but the cutbacks may not be enough to convince officials at the Federal Reserve that pay hikes aren’t stoking inflation.

Wages and salaries in the third quarter were 4.6% higher over 12 months, the Bureau of Labor Statistics said Tuesday. That was below the 5.2% peak pay hikes logged in mid-2022, but well above the pre-pandemic average.

The declining, but still high, pay raises may influence officials at the Federal Reserve who have worried that pay hikes are pushing up inflation by putting more money in the pockets of consumers. Workers—in high demand after 澳洲幸运5官方开奖结果体彩网:a wave of pandemic-era early retirement💧s—have commanded more pay as employers have competed for talent. Depending on how it’s measured, pay raises may even be keeping ahead of the rapid inflation over the past few years.

Tuesday’s data is closely watched by economists and the Fed because, unlike other measures of typical wages, it is adjusted for the composition of the workforce, meaning the average pay won’t go up just because a lot of lower-wage workers lost their jobs. For instance, average hourly wages spiked when the pandemic hit because lots of low-paid service workers got laid off.

Some economists reckoned the new figures would be of concern to officials at the Fed, who are set to release a decision Wedne𒁏sday on the central bank’s next move in its campaign of anti-inflation interest rate hik💛es.

Although the Fed is widely expected to hold rates steady, news that wages are pushing inflation up could influence officials’ signaling about whether th♔e Fed will raise rates again in the future, or keep them higher for longer, putting upward pressure on interest rates on mortgages, credit cards, and other credit. 

The wage growth seen in Tuesday’s report was consistent with an annual inflation rate of 3.2% to 3.7%, well above the 2% annual rise in consumer prices that the Fed is aiming to achieve, Jason Furman, a professor of economics at Harvard and former top economic advisor to President Barack Obama, wrote on X (formerly Twitter).

Others thought policymakers would focus more on the fact that wage growth is slowing, rather than that it’s still high.

“The underlying wage data contain both enough elements of good news (‘Fed's preferred measure fell’) and concern (‘but remains at levels higher than it hopes for’) that it's unlikely to affect tomorrow's Fed decision,” Justin Wolfers, a professor of economics at the University of Michigan tweeted. “Wage growth, like inflation, is on the way back to normal.”