U.S. wholesale prices rose last month and, although they remain low, suggest the U.S. economy has not yet fully overcome inflationary pressures.
The Producer Price Index, a measure that tracks inflation before it reaches consumers, rose 0.2% from September to October, up from a 0.1% rise the previous month, according to a report released Thursday by the Labor Department.
Wholesale prices rose 2.4% compared to the same month last year, accelerating from the 1.9% rise in September compared to the same month last year.
A 0.3% rise in service prices led October's rise. Wholesale commodity prices rose 0.1% after falling in the previous two months.
So-called core wholesale prices, which exclude food and energy prices, which tend to fluctuate from month to month, rose 0.3% from September and 3.1% from the same month last year. The survey results were in line with economists' expectations.
Inflation has been falling almost steadily since peaking in mid-2022. But average prices are still nearly 20% higher than they were three years ago, causing persistent public anger, and last week's presidential election, in which Donald Trump defeated Vice President Kamala Harris and secured a majority in the Senate. faction was returned to the Republican Party.
The October report on producer prices comes a day after the Labor Department reported that consumer prices rose 2.6% year-over-year last month, after consumer-level inflation slowed year-over-year in September. , indicating that it may be leveling off. slowest pace since 2021. But most economists say they think inflation will eventually slow again.
Inflation is trending towards the Federal Reserve's 2% year-over-year target, and central bankers are satisfied enough with the improvement to have cut their benchmark interest rates twice since September (11 times). (Policy change after interest rate hike). In 2022 and 2023.
Trump's election victory raises questions about the future trajectory of inflation and whether the Fed will continue to cut interest rates.
The Fed all but declared victory over inflation in September, cutting its benchmark interest rate by an unusually large 0.5%, the first rate cut since March 2020, when the pandemic devastated the economy. Last week, the central bank announced a second rate cut, this one a more typical quarter-point cut.
President Trump has promised to force prices down, including by encouraging oil and gas drilling, but he has also imposed massive taxes on imported goods and deported millions of immigrants working illegally in the United States. Some of his other campaign promises to do so are: Inflation theory according to mainstream economists.
still, Wall Street traders see an 82% chance of that happening. According to the CME FedWatch tool, the Fed is expected to cut interest rates for the third time at its next meeting in December.
The producer price index released on Thursday could provide an early indication of where consumer inflation is headed.
Economists are also keeping an eye on the development as some of its components, particularly health care and financial services, are flowing into the personal consumption expenditures (PCE) index, the Fed's preferred measure of inflation.
Capital Economics' Stephen Brown said in a commentary that core PCE prices will rise more than the Fed would like due to higher wholesale airfares, investment fees and health care prices in October. But he said the rate hike was “not enough to justify a pause for the Fed at its next meeting in December.”
Inflation began to soar in 2021 as the economy accelerated at an alarming rate from the pandemic recession, creating severe shortages of goods and labor. The Fed raised its benchmark interest rate 11 times in 2022 and 2023, the highest level in 23 years.
As a result, borrowing costs rose significantly and the United States was expected to fall into recession. That didn't happen. The economy continued to grow and employers continued to hire. And for the most part, inflation continues to slow.
