Select Page

It’s becoming a refrain. Today another inflation measure came in hotter than expected.

Which is the problem. It’s har to ignore the possibility that inflation has stopped its steady decline and its recent months has started to move up again.

Is there a problem here beyond a stickiness in prices that is preventing the Federal Reserve from reaching its inflation goals? And that might be endangering even a June timetable for an initial interest rate cut?

Prices paid to U.S. producers rose in February by the most in six months. The Producer Price Index for final demand increased 0.6% from January, the Labor Department reported today, Thursday, March 14. The PPI rose 1.6% from a year earlier. That’s the largest annual advance increase since September. And it above forecasts from economists.

The core PPI, which excludes volatile food and energy categories, advanced 0.3% from the prior month, and 2% year over year.

This surprise is even more troubling than the CPI inflation surprise on Tuesday. The Fed’s preferred inflation measure, the Personal Consumption Expenditures index, tracks some categories in the PPI more closely than it follows the CPI. In other words, today’s hotter than expected increase in wholesale prices problem foreshadows bad inflation news from the PCE index later this month.