That’s where incoming data reports — including the fresh jobs figures — could matter. Employers have been hiring at a surprisingly steady clip this year, given how much the Fed has raised interest rates. Policymakers will be gauging whether that trend continues to slow.
And Fed officials will devote attention to how quickly wages are climbing.
Central bankers have de-emphasized pay gains as a potential driver of inflation in recent months, suggesting instead that rapid wage growth probably signals that workers are trying to catch up with past inflation. Even so, many standard economic models suggest that if pay is climbing steeply, it could be hard to fully snuff out rapid inflation. Companies facing heftier labor costs will probably try to charge more to protect their profits, and workers who are earning more may find themselves capable of and willing to pay higher prices.
Jerome H. Powell, the Fed chair, recently highlighted slowing jobs growth, stable hours worked and slowing pay gains across a range of measures as signs that the labor market is getting into a better balance.
“We expect this labor market rebalancing to continue,” he said, speaking last week in Wyoming. But, he warned in the speech, the Fed is watching to make sure the economy doesn’t heat back up in spite of higher interest rates, a development that could mean that borrowing costs need to go higher.
“Evidence that the tightness in the labor market is no longer easing could also call for a monetary policy response,” Mr. Powell said.