U.S. producer prices rose in March from a year earlier at the fastest pace in nearly a year, but the gain was smaller than economists expected. And wholesale inflation has moderated on a monthly basis.
The Labor Department said Thursday that its producer price index — which measures inflationary pressure before it reaches consumers — rose 2.1% last month since March 2023, the biggest year-over-year jump since April. 2023. But economists had forecast a 2.2% increase, according to a survey of meteorologists conducted by data firm FactSet. And compared to February, wholesale prices rose just 0.2%, down from February’s 0.6% gain.
Excluding food and energy price volatility, so-called core wholesale prices rose 0.2% last month from February, the second consecutive decline, and 2.4% since March 2023. The year-over-year increase core producer prices were the highest since then. August.
The slightly better-than-expected producer price reading comes at a time of concern about stalling progress against inflation, raising questions about whether and when the Federal Reserve will cut interest rates.
Amid the Fed’s aggressive rate hikes, inflation has fallen steadily since peaking in mid-2022. But improvements have proven harder to come by lately.
The Labor Department reported Wednesday that its consumer price index rose 3.5% last month from a year earlier, the second consecutive year-over-year increase in inflation, which remains stuck well above The Fed’s 2% target. Consumer prices rose 0.4% last month from February, in line with January’s increase. They have not decreased on a monthly basis since October.
To counter the rebound in inflation that began in spring 2021, the Fed raised the benchmark interest rate 11 times between March 2022 and July 2023, bringing it to a 23-year high. The central bank has signaled that it plans to cut rates three times this year – a policy reversal that had been eagerly awaited on Wall Street. But the recent stubbornness of inflation has cast doubt on when the rate cuts will begin and whether the Fed will actually be able to squeeze in three of them this year.
Wall Street investors had initially hoped to see the first rate cut in March. But this did not happen and the inflation numbers have stabilized. Now, according to CME’s FedWatch tool, a majority of investors don’t expect a rate cut until the Fed’s September meeting.