US Producer Prices Rise on Higher Energy Costs, Inflation Pressure Moderates
Increased Costs for Energy Products Drive Up US Producer Prices
US producer prices in September exceeded expectations as higher energy costs fueled the rise. However, underlying inflation pressures at the factory gate continued to moderate, according to the Labor Department. The producer price index for final demand increased by 0.5% last month, with the 12-month increase standing at 2.2%.
Core Producer Price Index Shows Moderate Growth
The narrower measure of the producer price index, which excludes food, energy, and trade services components, grew by 0.2% in September. Despite this slight increase, the core producer price index remained below expectations. In the 12 months through September, the core PPI increased by 2.8%, slightly lower than the previous month.
Consumer Price Data to Provide Clues for Federal Reserve’s Decision
Market attention now turns to the release of September’s consumer price data, which is expected to provide insights into the Federal Reserve’s next move regarding interest rates. The central bank will carefully consider rising U.S. Treasury yields and ongoing conflicts in the Middle East. Financial markets anticipate that the Fed will maintain its current interest rates at the upcoming policy meeting.
Economic Growth Remains Strong Despite Rate Hikes
Despite the recent rate hikes, the US economy continues to exhibit strength, creating 336,000 jobs in September. This exceeded economists’ expectations and reflects positive growth. The likelihood of the Federal Reserve leaving interest rates unchanged is further supported by top-ranking officials who have signaled caution due to soaring yields on long-term U.S. government bonds.
The Fed’s Path of Rate Hikes
Since March 2022, the Federal Reserve has raised its benchmark overnight interest rate by 525 basis points, bringing it to the current range of 5.25% to 5.50%. However, recent developments in the bond market may influence the central bank’s decision on future rate hikes.
Overall, US producer prices rose due to higher energy costs, while underlying inflation pressures remained moderate. The upcoming release of consumer price data will provide further insights into the Federal Reserve’s decision-making process. Despite rate hikes, the US economy continues to exhibit strong growth. The Fed’s cautious approach to future rate hikes reflects concerns over soaring yields on long-term US government bonds.