US Economy News Today: Wholesale Price Index Adds to Inflation Equation

Recent Inflation Data Shows Need for Fed ‘Patience’ on Rate Cuts, Collins Says

Recent inflation data has not changed the overall economic outlook for Boston Fed President Susan M. Collins.

In a speech to the Economic Club of New York, Collins said while she was worried interest rates were becoming too high at the beginning of the year, strong jobs reports since then have shown the labor market is moving into better balance. Furthermore, recent elevated inflation prints were not necessarily a surprise given how quickly the rate of inflation declined in the second half of 2023. 

Wednesday’s inflated reading of the Consumer Price Index (CPI) sent markets lower after investors worried that higher inflation would pressure the Federal Reserve to keep interest rates elevated. Indeed, Collins said the Fed may need to take more time to watch data before moving on rate cuts. 

“Overall, the recent data have not materially changed my outlook, but they do highlight uncertainties related to timing, and the need for patience— recognizing that disinflation may continue to be uneven,” Collins said. “This also implies that less easing of policy this year than previously thought may be warranted. “

-Terry Lane

New York Fed’s Williams Still Sees Rate CutsThis Year Despite Inflation ‘Bumps’

While pointing to recent “bumps” along the path, New York Fed President John C. Williams said he still believes inflation will move lower.

The Federal Reserve would likely need to start cutting interest rates this year he said in a prepared remarks delivered in New York City Thursday.

“The economic projections we issued at that time indicate that if the economy proceeds as expected, it will make sense to dial back the policy restraint gradually over time, starting this year,” said Williams, who didn’t offer additional comments on the timing or number of rate cuts.

Like some other members, Williams said the Federal Reserve will need to remain “data-dependent,” meaning upcoming inflation reports could change the central bank’s plans on moving interest rates.

His comments come as this week’s release of the Consumer Price Index showed that prices edged higher again in March, continuing a trend of rising inflation in 2024 after significant declines the year prior. 

-Terry Lane

Wholesale Prices Cool Off in March

In somewhat of a respite for inflation watchers, wholesale prices in March cooled slightly to come in below economist forecasts.

The Bureau of Labor Statistics reported the Producer Price Index (PPI) rose 0.2% in March from the previous month, lower than the 0.3% increase forecast that economists surveyed by the Wall Street Journal and Dow Jones Newswire. The modest increase follows a PPI jump of 0.6% in February. 

On a year-over-year basis, the PPI jumped 2.1% in March, half a percentage point higher than February’s reading. It was the largest annual jump since April 2023.

The PPI  “core inflation” reading, which subtracts volatile food and energy prices, was up 0.2% in March, in line with estimates, and lower than February’s core PPI reading. 

While the CPI measures prices consumers pay at the store, the PPI measures the prices that wholesalers charge retailers and other distributors to buy their products, often indicating how prices may move in the coming months. 

The wholesale data comes just a day after the Consumer Price Index (CPI) showed prices were up 3.5% over the year in March, accelerating from the previous month, and elevating worries that the Federal Reserve would not be able to follow through with the anticipated rate cuts in June.

-Terry Lane