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Tight US labour markets fuel wage gains; China impact looms: Fed

US labour markets were tight enough to fuel small wage gains in some professions in recent weeks, though some companies already were feeling a chill from an economic slowdown in China, the Federal Reserve said on Wednesday. Overall, US economic activity continued to expand across most regions and sectors from July to mid-August, the Fed said in its Beige Book report of anecdotal information on business activity collected from contacts nation-wide.

The combination of a healing labour market and worries about Chinese economic growth underscored the challenge faced by the US central bank as it mulls raising interest rates as soon as this month. While many Fed policymakers think the US labour market is close to full strength, China is casting a long shadow on the global economy. Prospects of slower global growth are weighing on oil prices, making it likely the Fed will undershoot its 2 percent inflation target for some time.

Copyright Reuters, 2015