US labour costs lift more than expected in March quarter

The news: US labour costs increased more than expected in the first quarter amid a rise in wages and benefits, confirming the surge in inflation early in the year.

The numbers: The Employment Cost Index (ECI), the broadest measure of US labour costs, increased 1.2% last quarter after rising by 0.9% in the fourth quarter, the Bureau of Labor Statistics said. Economists had forecast an advance of 1.0%. Wages increased 1.1% in the January-March quarter after advancing by the same margin in the prior three months.

The context: The pick-up in labour costs reported by the Labor Department on Tuesday was despite signs of some easing in labour market conditions as supply rises.The ECI is viewed by policymakers as one of the better measures of labour market slack and a predictor of core inflation because it adjusts for composition and job-quality changes.The report followed data last week that showed price pressures heating up in the first quarter. Federal Reserve officials started a two-day policy meeting on Tuesday. The US central bank is expected to leave its benchmark overnight interest rate unchanged in the current 5.25%-5.50% range, but the higher inflation is likely to delay a much- anticipated interest rate cut later this year.