US producer prices increased moderately in March as a rise in the cost of services was softened by a fall in goods prices, calming fears of a resurgence in inflation.
The report from the Labour Department yesterday led economists to anticipate milder increases in the inflation measures tracked by the Federal Reserve for monetary policy relative to the strong consumer price readings in March.
High inflation and persistent labour market strength have prompted financial markets and most economists to push back expectations for an initial Fed interest rate cut to September from June. The minutes of the US central bank’s March 19-20 policy meeting, which were released on Wednesday, also showed policymakers were concerned that progress on inflation might have stalled.
“Producer prices tell us that inflation is not worsening, yet,” said Christopher Rupkey, chief economist at FWDBONDS. “Policymakers can remain vigilant as they await more data on where inflation is heading next. Tamer producer prices may spell some relief for consumers in coming months.”
The producer price index for final demand rose 0.2 per cent last month after increasing by an unrevised 0.6pc in February, the Labour Department’s Bureau of Labour Statistics said. Economists polled by Reuters had forecast the PPI would gain 0.3pc.
In the 12 months through March, the PPI advanced 2.1pc after rising 1.6pc in February.
Consumer prices increased more than expected in March for the third straight month, government data showed on Wednesday. Since March of 2022, the Fed has raised its benchmark overnight interest rate by 525 basis points to the current 5.25pc-5.50pc range, where it has been since last July.
The cost of services increased 0.3pc in March after rising by the same margin in February, the PPI report showed. That was driven by a 3.1pc surge in the cost of securities brokerage, dealing, investment advice and related services. Portfolio management fees gained 0.5pc.