Key inflation reports suggest the Fed’s rate hike could start to cool prices


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A key measure of inflation, wholesale prices, rose by 8% in October from a year earlier, according to the latest report from the Bureau of Labor Statistics.

While still historically high, it was the smallest increase since July last year and significantly better than forecast. This is the second inflation report this month showing signs of cooling in rising prices that have plagued the economy.

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

On a monthly basis, producer prices rose 0.2%, below expectations and even A revised 0.2% increase was seen in September.

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

Month-over-month, the core PPI price was flat, the lowest monthly reading since November 2020. In September, the core PPI increased by 0.2% revised from the previous month.

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

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

“Today’s news — that prices paid by businesses moderated last month — comes a week after news that prices paid by consumers also moderated,” Biden wrote Tuesday. “Also, today’s report also shows that food inflation is slowing – a welcome sign for family grocery bills as we head into the holidays.”

For most of this year, the Federal Reserve has been trying to reduce inflation as much as possible by tightening monetary policy, including unprecedented spending. four consecutive rate hikes of 75 basis pointsor three-quarters of a percentage point.

The better-than-expected PPI data reflects a slowing economy, with supply moving more into balance, said Jeffrey Roach, chief economist for LPL Financial.

Costs related to transportation and warehousing, for example, fell for the fourth month in a row, likely the result of an improving global shipping climate, he said. Producer costs for new cars fell the most since May 2017, he added.

“Barring a geopolitical or financial crisis, inflation should continue its deceleration into 2023,” he said in a statement.

Because PPI captures price changes occurring further upstream, the report is considered by some to be a leading indicator for broad inflationary trends and a predictor of what consumers will eventually see at the store level.

“The PPI reading certainly adds more fuel to the fire for those who feel we may finally be in a downward inflation trend,” Mike Loewengart, head of Morgan Stanley’s construction portfolio model, said in a statement.

Last week’s Consumer Price Index shows inflation slowing to 7.7% from 8.2% year-over-year for consumer goods, surprising investors and giving Wall Street its biggest boost since 2020.

The CPI data was “reassuring,” Fed vice chairman Lael Brainard said on MondaySigning that rate hikes appear to take hold, and if economic data continues to show inflation on the decline, then the central bank can scale back the extent of its future rate hikes.

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

Ricchiuto said October’s numbers were just a few steps lower than those seen in September.

“This is not the kind of thing that tells the Fed to stop tightening rates,” he said. However, “they can 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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