Key inflation report indicates the Fed’s rate hikes may be starting to cool prices

CNN Business

The main measure of inflation, wholesale prices, rose 8% in October from a year ago, according to the latest report from the Bureau of Statistics.

Although still historically high, it was the smallest increase since July last year and was well ahead of forecasts. It’s the second inflation report this month that shows signs of a slowdown in inflation that has weighed on the economy.

Economists had expected the Producer Price Index, which measures the price of goods and services before they reach consumers, to show an 8.3% annual increase, down from 8.4% revised in September.

On a monthly basis, producer prices rose 0.2%, lower than expected and even in the revised 0.2% increase seen in September.

Year-on-year, the core PPI – which excludes food and energy, items whose prices are more vulnerable to market volatility – measured 6.7%, down from the annual increase revised in September. 7.1%.

On a monthly basis, the core PPI price was unchanged, the lowest monthly reading since November 2020. In September, the core PPI increased by 0.2% revised from the previous month.

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Economists expected annual and monthly core PPI to measure 7.2% and 0.3%, according to Refinitiv estimates.

President Joe Biden announced the October PPI report on Tuesday and called it “more good news for our economy this morning, and more signs that we are starting to see inflation pick up.” we are.”

“Today’s news — that business prices were revised last month — comes a week after news that consumer prices also fell,” Biden wrote on Tuesday. “And, today’s report also showed that inflation eased – a boon for household grocery bills as we head into the holidays.”

For most of this year, the Federal Reserve has sought to reduce decades of inflation by tightening monetary policy, including raising interest rates. four in a row of 75 points, or three quarters of a percent.

The better-than-expected PPI data reflects an economy that has slowed, with more supply growing in the balance, said Jeffrey Roach, chief economist for LPL Financial.

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Costs related to transportation and warehousing, for example, decreased for the fourth month in a row, which could be a result of improved global weather, he said. Producer prices for new cars fell the most since May 2017, he added.

“Without a geopolitical or financial crisis, inflation should continue its decline in 2023,” he said in a statement.

Since the PPI captures changes in prices that occur at higher levels, the report is seen by some as a key indicator of broader inflation and a predictor of what consumers will see in the future. sales level.

“The PPI reading certainly adds more fuel to the fire for those who feel that we may finally be in the midst of an uptick in inflation,” said Mike Loewengart, head of the creation of model portfolios at Morgan Stanley, in a statement.

Last week’s Consumer Price Index showed inflation rose to 7.7% from 8.2% a year for consumer goods, surprising investors and giving Wall Street a big boost. especially until 2020.

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The CPI data is “encouraging,” Fed Vice President Lael Brainard said on Monday, noting that inflation appears to be holding, and that economic data continues to show an increase in inflation. inflation, the central bank can slow down the rate. in future rate hikes.

“When you look at the inflation numbers, there’s some evidence that we’ve peaked, but are we coming down too fast?” Steven Ricchiuto, chief economist at Mizuho Americas told CNN Business.

Ricchiuto noted that October’s numbers were only two steps higher than those seen in September.

“These are not the kinds of things that tell the Fed to stop tightening rates,” he said. However, “they may tell you [that] you don’t need 75 basis points.”

CNN’s DJ Judd and Matt Egan contributed to this report.


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