US wholesale prices rose more than expected in January

WASHINGTON: US wholesale prices rose more than expected in January, according to government data published Friday, as services costs were lifted by a jump in the index for hospital outpatient care. The producer price index (PPI) rose 0.3 percent in January after falling by 0.1 percent a month earlier, the Labor Department said in a statement.

This was above market expectations of a smaller 0.1 percent rise, according to Briefing.com. “PPI inflation surprised to the upside in January,” High Frequency Economics chief US economist Rubeela Farooqi wrote in a note to clients. “The data show significant progress on producer prices from rates of change a year earlier,” she added. “But like the CPI, monthly changes accelerated to start the year.”

The uptick in producer prices follows a similar monthly increase in the headline consumer price index (CPI) inflation measure in January, which rattled financial markets and pushed away expectations of an imminent interest rate cut by the US Federal Reserve. Stocks on Wall Street ended the day lower following the new inflation readings. US Treasury yields, which are heavily influenced by interest rate expectations, rose on the news.

The “major factor” behind the rise in the services index was the 2.2 percent monthly rise in hospital outpatient care, while a range of other services also rose, the Labor Department said in a statement. This helped to counteract the decline in the index for final demand goods, which was driven by a 1.7 percent decline in energy prices.

The US Federal Reserve should “resist the temptation to act quickly” as it contemplates the right time to begin interest rate cuts, a senior bank official said Friday. “The economy is healthy, price stability is within sight, and there is more work to do,” San Francisco Fed President Mary Daly told a conference in Washington. “To finish the job will take fortitude,” said Daly, who is a voting member of the Fed’s rate-setting committee this year. “We will need to resist the temptation to act quickly when patience is needed and be prepared to respond agilely as the economy evolves,” she added.

The US central bank is currently in a holding pattern, after hiking rates to a 23-year high to tackle surging prices. With inflation inching ever closer to the Fed’s long-term target of two percent in recent months, officials have indicated they expect to start cutting interest rates this year.

But they remain divided over the best time to do so, with some voicing concern about prematurely declaring victory over inflation. On Friday, Daly cautioned against being overly optimistic about projections that show the world’s largest economy on track to vanquish inflation. “Projections and expectations are just that: views about what we think will happen,” she said.

“We need more time and data to be sure that they will be realized,” she continued, adding that the Fed could afford to take a more “gradual approach.” “Gradual doesn’t mean slow, it doesn’t mean weak,” she said. —