Bad news for doves: A key gauge of employment costs watched closely by Fed officials was much warmer than expected last quarter, a development that’ll almost surely get a mention by Jerome Powell during this week’s press conference.

The Employment Cost Index rose 1.2% in Q1, the BLS’s quarterly update, released on Tuesday, showed.

That was meaningfully ahead of consensus, the briskest in a year on a rounded basis and the quickest since Q3 2022 unrounded (decimals!).

Private wages and salaries rose 1.3% sequentially, the most pronounced increase in a year.

As a reminder that regular readers don’t need: It was an ECI overshoot which prompted Powell’s initial hawkish pivot, paving the way for the Fed to jettison the “transitory” characterization of inflation.

Taken at face value, Tuesday’s release argued strongly against rate cuts anytime soon. Wages and salaries for all workers rose 4.4% YoY in the 12-month period to March and 4.3% for private sector workers.

Those rates are (obviously) lower versus the pace observed last year, but do note: They picked up from the prior quarter.

I don’t think you need a lot of complicated analysis here, frankly. These numbers simply don’t suggest the US is on the fast track to slower inflation.

This release was a nail in the coffin of sorts for rate cut hopes, with the usual caveat that the first negative NFP print (assuming one ever shows up) will change the game overnight.

“There is nothing in this series to suggest a near-term path for the Fed to contemplate cutting rates,” BMO’s Ian Lyngen said. “Powell will need a lot more convincing at this point.”