How Wholesale Inflation Could Temper Hopes of a Federal Reserve Rate Cut

Measurements of wholesale pricing moved higher successful June, indicating nan Fed whitethorn still person much activity to do earlier moving connected complaint cuts.

The Producer Price Index (PPI) accrued month-over-month by 0.2% for June, while the anterior month's wholesale ostentation data was revised upward to bespeak a level reading, Bureau of Labor Statistics information showed Friday. That was higher than economists surveyed by The Wall Street Journal and Dow Jones Newswires expected.

Wholesale prices tin bespeak early user inflation, arsenic retailers often walk connected costs they incur to shoppers. The PPI study besides contains elements that straight impact the Federal Reserve's preferred measurement of inflation.

“This morning’s information is simply a reminder that ostentation is still an rumor and is apt to beryllium pinch america for longer than astir group expect,” wrote Chris Zaccarelli, main finance serviceman astatine Independent Advisor Alliance.

Fed May Still Be Facing Inflationary Pressures

The wholesale study whitethorn temper expectations fueled by different measures of ostentation that person been moving little successful caller reports.

On Thursday, nan Consumer Price Index (CPI) showed its lowest reference successful a twelvemonth and was nan 3rd study successful a statement showing ostentation had slowed. The little ostentation readings person encouraged investors and traders, who deliberation nan Federal Reserve will statesman cutting liking rates as soon arsenic September.

The CPI study moreover encouraged Federal Reserve officials, it seems.

Chicago Federal Reserve Bank President Austan Goolsbee told reporters that nan CPI study was "excellent" news and that he is gaining assurance ostentation is approaching nan cardinal bank's yearly goal.

"My position is, this is what nan way to 2% looks like," Goolsbee said Thursday, according to Reuters.

But Friday's expanding wholesale value information showed nan Fed still whitethorn person activity to do connected inflation, economists said. 

“Still-hot value pressures astatine nan shaper level show that nan Fed won't beryllium afloat comfortable and assured to move conscionable yet,” wrote BMO Capital Markets Senior Economist Jennifer Lee.