U.S. producer prices unexpectedly rise; Fed rate cut still expected
WASHINGTON - U.S. producer prices unexpectedly rose in August and underlying producer inflation rebounded, but the data on Wednesday did not change financial market expectations that the Federal Reserve will cut interest rates again next week to support a slowing economy.
President Donald Trump on Wednesday called on the Fed to push interest rates down to zero or into negative territory. In the 12 months through August, the PPI advanced 1.8% after increasing 1.7% in July. Economists polled by Reuters had forecast the PPI would be unchanged in August and rise 1.7% on a year-on-year basis.
The Fed, which has a 2% annual inflation target, tracks the core personal consumption expenditures price index for monetary policy. The core PCE price index rose 1.6% on a year-on-year basis in July and has undershot its target this year. U.S. tariffs on Chinese goods were this month broadened to include consumer goods. There are fears the manufacturing downturn could spill over into the broader economy.In August, wholesale energy prices fell 2.5% after rebounding 2.3% in the prior month. They were weighed down by a 6.6% drop in gasoline prices, the most since January, which followed a 5.2% percent jump in July.
The cost of services increased 0.3% after decreasing 0.1% in July. Services were boosted by a 6.4% surge in the cost of guestroom accommodation such as hotels and motels, the largest gain since April 2009.
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