US wholesale prices surged higher than anticipated in January, signaling a potential slowdown in the fight against inflation. This unexpected increase, coming after a slight uptick in consumer prices, has raised doubts about the Federal Reserve's plans for further interest rate cuts this year.
U.S. wholesale prices came in hotter than expected last month at a time when progress against inflation appears to have stalled, undercutting expectations for lower interest rates this yearFILE - Shoppers guide their carts through the milk display in a Costco warehouse Thursday, Jan. 23, 2025, in Sheridan, Colo. The Labor Department reported Thursday that its producer price index — which tracks inflation before it reaches consumers — rose 0.4% from December and 3.5% from January 2024.
Wholesale services prices rose 0.3%, pushed higher by increasing hotel costs. Goods services climbed 0.6% on higher energy prices. Wholesale prices can offer an early look at where consumer inflation might be headed. Economists also watch it because some of its components, notably health care and financial services, flow into the Federal Reserve’s preferred inflation gauge — the personal consumption expenditures, or PCE, index.
In response, the Federal Reserve raised its benchmark interest rate — the fed funds rate — 11 times in 2022 and 2023. Inflation began tumbling — from a four-decade high 9.1% in June 2022 to a low of 2.4% in September, tantalizingly close to the central bank's 2% target. The Fed was satisfied enough to reverse course and cut its rate three times in the last four months of 2024.
INFLATION WHOLESALE PRICES INTEREST RATES FEDERAL RESERVE ECONOMIC OUTLOOK
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