U.S. Treasury Secretary Scott Bessent said wages for the lowest-paid quarter of American workers rose 5.5% over the past year, even as core inflation cooled to 2.5%. He framed the trend as a "C economy" replacing the uneven, K-shaped pattern of recent years, while a Federal Reserve official countered that policy still needs to stay restrictive.
Bessent points to 5.5% wage growth for lower earners
Treasury Secretary Scott Bessent said wages for workers in the bottom 25% of the income distribution rose 5.5% over the past year, compared with about 1.5% for workers in the highest quartile over the same period. He used the gap to argue that economic gains have started reaching lower earners rather than concentrating at the top.
Bessent described the pattern as a "C economy," replacing what is often called a K-shaped economy, where higher-income households advance while lower-income groups face weaker financial conditions. His assessment centers on income growth rather than differences in household wealth or asset ownership.
US core CPI eases to 2.5%
The Consumer Price Index rose 3.4% year over year in July, up 0.1% from the previous month. Core CPI, which excludes food and energy, eased to 2.5% annually and rose 0.2% month over month, with both readings matching market forecasts.
Comparing the 5.5% wage gain with the 2.5% core rate gives lower-paid workers a positive real wage gap. However, headline inflation remains higher because food and energy costs make up a larger share of lower-income household budgets.
Fed officials still focused on inflation
Bessent has linked the wage and inflation figures to his case for Federal Reserve interest rate cuts, saying the current environment can support growth without reigniting price pressures. Cleveland Fed President Beth Hammack said monetary policy should keep some restraint, arguing inflation remains above the central bank's target.
According to CoinGape: "we've got some amount of restraint coming from policy", Hammack said. The gap between the 3.4% headline rate and the 2.5% core reading remains relevant to that debate, with Fed officials continuing to weigh inflation, wages and broader economic activity as they shape future rate decisions.
Source: CoinGape
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