How much further can the labour market tighten?

The Fed is almost certain to raise interest rates at the conclusion of its policy meeting next week and, against a backdrop of tightening labour market conditions and gradually rising wage inflation, we expect it to raise rates another four times in 2018. The unemployment rate will probably fall further next year. Dwindling slack hasn’t put much upward pressure on wage growth so far, but the growth rate of non-wage benefits has accelerated. We expect a broader pick-up in wage pressures to keep core inflation on a gradual upward trend next year.