Wholesale Inflation in the US Accelerated in January, Indicating Price Increase Last Month

Credits: The Japan Times

In January, wholesale prices in the United States showed an increase, indicating that some inflationary pressures in the economy remain elevated.

The Labor Department’s producer price index, which tracks inflation before it affects consumers, rose by 0.3% from December to January. This follows a slight decrease of -0.1% from November to December. Year over year, producer prices saw a mild rise of 0.9% in January.

Excluding volatile food and energy costs, core wholesale prices rose by 0.5%, the most since July of the previous year. Compared to the previous month, core prices climbed 2% year over year, up from 1.7% in the previous month.

Wholesale Price In The US (Credits: KTVZ)

President Joe Biden’s re-election bid has been impacted by public frustration with inflation, despite measures showing a decrease from previous highs. Many Americans are concerned that average prices are still approximately 19% higher than when Biden took office.

Some of the rise in producer prices in January can be attributed to measurement quirks, such as an increase in the cost of financial management services by 5.5% from December to January.

Additionally, price increases imposed by many companies early in the year often lead to higher overall inflation measures in January.

However, the costs of hospital care, doctor visits, and hotel stays also increased last month, indicating that inflation in travel, healthcare, and other service industries remains elevated.

These figures are likely to influence the Federal Reserve’s decisions regarding interest rates. Fed officials are expected to monitor several more months of data to ensure a downward trend in inflation before making any decisions on rate cuts.

Despite optimism from some Fed policymakers that inflation is decreasing, others, like Raphael Bostic, president of the Federal Reserve Bank of Atlanta, remain cautious.

The Fed’s preferred price measure, which will be reported later this month, is expected to show a significant increase in core prices, possibly by as much as 0.4% or 0.5%. This pace is much faster than what is consistent with the Fed’s inflation target.

While some Wall Street traders and economists had expected the Fed to implement its first rate cut as soon as March, most now envision a rate cut in May or June, as the Fed seeks greater confidence that inflation is sustainably returning to its 2% target.

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