Former Minister of Finance Lawrence H Sommer keep your eyes peeled for the “biggest number of the week.” federal reserve‘s inaugural meeting of the Federal Open Market Committee this year.

What happened: In a very busy economic calendar this week, Summers told Bloomberg TV, “The thing I’m going to focus on the most is Tuesday’s release of the employment cost index.”

The ECI is the most comprehensive measure of labor costs. According to data from the Department of Labor, it rose 1.2% in the third quarter of 2022 after rising 1.3% in the April-June period.

“That’s the gold standard for numbers on wage inflation and what’s happening to labor costs,” Summers said.

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Why it matters: “Wages are a kind of super-core inflation. So I think that’s going to be a very revealing number to come out when the Fed starts its deliberations,” the economist said.

According to Reuters, the market is expecting a 25 basis point hike from the Federal Reserve to bring the Fed’s interest rate window to 4.5% to 4.75%, and pricing points to two more hikes of a similar magnitude before cuts later this year there.

However, some well-known economists have done so argued that the central bank should stick to higher hikes, even there Inflation seems to be Cooling.

“If this number [ECI] is showing significant softness, which I think is an important sign that disinflation is taking place despite the tightness in the labor market. If these numbers show robust wage inflation, that raises concerns about how important it is for the Fed to stay the course and offer full treatment of inflation,” Summers said.

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Photo courtesy: Brookings Institution on Flickr