PRICES ‘MARCH’ HIGHER

Wholesale inflate

Wholesale prices last month saw their sharpest year-on-year increase in 11 months — one day after a hotter-than-expected US inflation report sent stocks tumbling and stoked fears that the Fed won’t cut interest rates anytime soon.

The producer price index — the metric that tracks the prices of products sold as they leave manufacturers — rose 2.1% in March versus a year earlier — its steepest gain since April 2023, according to the Department of Labor.

On the positive side, the PPI’s increase — driven by rising prices for services including airfares and securities brokerage — came in slightly below economists’ forecasts for a 2.2% gain, according to Bloomberg. On a month-to-month basis, the PPI rose 0.2% after a sharp advance in February, slightly below the expected 0.3% increase.

On Wednesday, the Bureau of Labor Statistics reported that the consumer price index — which tracks changes in the costs of everyday goods and services — rose 3.5%, coming in well above the Fed’s 2% target and marking the third straight month the CPI came in higher than expected.

Wholesale prices outside the volatile food and energy categories rose 0.2% from February to March, the same accelerated pace as in the previous month.

Troubling trend

The Fed tracks core prices because they tend to provide a good read of where inflation is headed.

The March figures provide evidence that inflation, after having steadily dropped in the second half of 2023, is now stuck at an elevated level — threatening to torpedo the prospect of multiple rate cuts.

Fed officials have made clear that with the economy healthy, they’re in no rush to cut their benchmark rate despite their earlier projections that they would do so three times this year.

Wednesday’s CPI report “pours cold water” on suggestions that the readings in January and February “represented the start of new-year price increases that were not likely to persist,” Kathy Bostjancic, chief economist at Nationwide, said in a research note.

“The lack of moderation in inflation will undermine Fed officials’ confidence that inflation is on a sustainable course back to 2% and likely delays rate cuts to September at the earliest and could push off rate reductions to next year.”