US wholesale inflation cooled in July, a sign that price pressures continue to ease

WASHINGTON – Wholesale price increases in the United States slowed in July, suggesting that inflationary pressures are easing further as the Federal Reserve moves closer to cutting interest rates, likely starting next month.

The Labor Department reported Tuesday that its producer price index — which tracks inflation before it reaches consumers — rose 0.1% from June to July and 2.2% from a year earlier.

Excluding food and energy prices, which tend to fluctuate from month to month, so-called basic wholesale prices were unchanged from June and rose 2.4% from July 2023. The increases were milder than those Forecasters expected and were nearly consistent with the Fed’s 2% inflation target.

The producer price index can provide an early signal of the direction of consumer inflation. Economists also watch it because some of its components, namely health care and financial services, flow into the Fed’s preferred inflation gauge — the personal consumption expenditures index, or PCE.

On Wednesday, the Labor Department will release its best-known measure of inflation, the consumer price index. Forecasters estimated that consumer prices rose 0.2% from June to July, after falling 0.1% the previous month and 3% in July 2023, according to research from data firm FactSet.

Inflation has plummeted since hitting a four-decade high in mid-2022. But as Americans prepare to vote in November’s presidential election, many remain unhappy with consumer prices, which are nearly 19% higher than they were before. of the start of the inflationary surge in the spring of 2021. Many have placed the blame on President Joe Biden, although it is unclear whether they will hold Vice President Kamala Harris accountable as she seeks the presidency.

In its fight against high inflation, the Fed raised its benchmark interest rate 11 times in 2022 and 2023, reaching a 23-year high. From 9.1% in June 2022, year over year consumer price inflation decreased to 3%.

THE US jobs report for Julywhich was much weaker than expected, reinforced widespread expectations that Fed policymakers will begin cutting rates when they meet in mid-September to try to support the economy. The jobs report showed that the unemployment rate rose for the fourth consecutive month to 4.3%, still healthy by historical standards but the highest level since October 2021.

Over time, a succession of rate cuts by the Fed would likely lead to lower borrowing costs across the economy—for mortgages, auto loans, and credit cards, as well as business loans, and could also increase share prices.

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