PRICE IS NOT RIGHT

Jay: Pesky inflation

After a key inflation gauge exceeded analysts’ estimates, Federal Reserve Chair Jerome Powell admitted Tuesday that it was easing more slowly than expected.

The Producer Price Index, which measures prices at the wholesale level, increased by 0.5% last month, topping the 0.3% forecast by Dow Jones and signaling continued pressure on consumers.

Powell said during the annual general meeting of the Foreign Bankers’ Association in Amsterdam that the Fed will likely have to keep decades-high interest rates at current levels for longer than initially hoped.

“I expect that inflation will move back down . . . on a monthly basis to levels that were more like the lower readings that we were having last year,” Powell said.

However, he said “my confidence in that is not as high as it was” given faster than expected inflation through the first three months of the year.

“We did not expect this to be a smooth road. But these [inflation readings] were higher than I think anybody expected,” Powell said.

Powell maintained that it remained unlikely the Fed would have to raise rates any further, even if the prospect for rate cuts has become less certain.

“It is more likely . . . we hold the policy rate where it is,” he said.

Rates steady

His comments largely restated those made at his press conference after this month’s Fed meeting, which kept rates steady in a 5.25% to 5.5% range.

Investors continue to anticipate an initial rate cut in September. The markets rallied in the afternoon, with all three indexes in the green. The Nasdaq gained 0.8% to close at a record 16,511.

A more significant data release comes Wednesday when information on consumer prices in April is published.

Powell spoke just hours after the Bureau of Labor Statistics released data showing that wholesale prices rose more than expected in April amid strong gains in the costs of services like portfolio management and hotel accommodation, indicating that inflation remained stubbornly high early in the second quarter.

Excluding food and energy prices, core PPI was also up 0.5% — above the analysts’ estimate of 0.2%.