Welcome to Extreme Investor Network, where we provide you with unique insights and valuable information on the economy that you won’t find anywhere else. Today, we’re diving into the latest data on wholesale inflation and what it means for the Federal Reserve’s upcoming decisions on interest rates.
The producer price index, a key measure of wholesale inflation, rose less than expected in July, signaling a potential opportunity for the Federal Reserve to start lowering interest rates. The index increased by 0.1% on the month, with the core PPI (excluding food and energy components) remaining flat. Economists had anticipated a 0.2% increase for both the all-items and core readings.
Despite a 0.6% jump in final demand goods prices, driven primarily by a surge in energy prices, the overall wholesale inflation reading was relatively tame. Services prices saw a 0.2% decline, the largest drop since March 2023. This data is crucial as the PPI is considered a leading indicator for inflation, providing insights into pipeline inflation from the perspective of manufacturers and suppliers.
Looking ahead, economists are also anticipating a 0.2% monthly increase for both the headline and core consumer price index (CPI), which measures the actual prices consumers pay in the marketplace. These inflation measures are closely monitored by the Fed as they play a role in the calculation of the personal consumption expenditures price index.
With markets already pricing in an interest rate cut at the September Fed meeting, the main question remains whether the cut will be a quarter or a half percentage point. Fed officials are committed to fighting inflation until they reach their 2% goal, and recent data has been supportive of their efforts.
A recent survey released by the New York Fed revealed that consumers’ expectations for inflation three years from now have fallen to 2.3%, the lowest in the history of the survey. However, lower-income households are starting to feel the impacts of inflation more acutely, with concerns rising about missing debt payments and access to credit.
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