Wholesale prices last month posted the largest year-on-year increase in 11 months, but the following day, stock prices plummeted on a report on higher-than-expected U.S. inflation, raising concerns that the Fed won’t cut interest rates soon. It was the day after that.
According to the U.S. Department of Labor, the producer price index, which tracks the price of products shipped by manufacturers, rose 2.1% in March from a year earlier, the largest increase since April 2023.
On the positive side, the rise in PPI due to higher prices for services such as airfares and brokerage was slightly less than the 2.2% rise expected by economists, according to Bloomberg. On a month-on-month basis, the PPI rose 0.2 after a strong rise in February, slightly below the 0.3 rise expected by economists.
The lower-than-expected numbers provided some modest relief before the bell Thursday morning. After falling as much as 150 points in early trading, Dow futures were still rising, and S&P 500 futures were flat.
On Wednesday, the Bureau of Labor Statistics said the Consumer Price Index, which tracks changes in the cost of everyday goods and services, rose 3.5%, well above the Fed’s 2% target, marking the third consecutive month of increases in the closely watched index. reported. Higher than expected.
The Dow Jones Industrial Average on Wednesday as expectations for the Federal Reserve to begin cutting interest rates were pushed back from June to September, lowering the consensus estimate to two quarter-point cuts instead of three. It fell by 422 points.
Wholesale prices, excluding the volatile food and energy sectors, rose 0.2% from February to March, the same pace as the previous month.
The Fed tracks core prices closely because it tends to give an accurate reading of where inflation is heading.
March figures show worrying evidence that inflation remains high after falling steadily in the second half of 2023, threatening to undermine prospects for multiple interest rate cuts this year. .
Fed officials said they are in no hurry to cut rates because the economy is healthy, despite initial expectations that they would cut rates three times this year.
Kathy Bojancic, chief economist at Nationwide, said Wednesday’s CPI report “suggests that January and February’s gains simply represent the start of a new year of price increases that are unlikely to be sustained. “We are dousing them with cold water,” he said in a research note.
“The lack of easing in inflation undermines Fed officials’ confidence that inflation is on a sustainable trajectory back to 2%, and could delay rate cuts until September at the earliest. , the rate cut could be pushed back to next year.”
with post wire
