US Inflation Surges, Producer Price Index Hits High In 7 Months

WASHINGTON: According to a Labor Department report released on Thursday, US wholesale prices, one of the primary factors that determine inflation, experienced their highest increase in seven months in January.

This increase appeared to further complicate the Federal Reserve’s task of controlling price growth.

According to the Labor Department’s Producer Price Index (PPI) report, wholesale prices, or what retailers pay when they buy products from manufacturers in large quantities, increased by 0.7% in January, the most since June of last year, when they increased by 1.2%.

Core PPI, a separate measure of wholesale prices that excludes volatile food and energy costs, saw its highest increase in ten months last month, at 0.6 percent.

The Consumer Price Index (CPI) report for January, which also showed stickier-than-expected inflation in the United States, comes just two days after the PPI reading.

In the year to January, the Consumer Price Index (CPI) increased by 6.4%, which was the least amount of inflation since October 2021.

The index, on the other hand, saw a 0.5% increase in January after a 0.1% decrease in December. January’s core month-on-month CPI, which excludes volatile energy and food prices, was unchanged from December’s 0.4% increase.

After a year of aggressive monetary tightening, the Federal Reserve’s plans to have smaller rate hikes this year are in jeopardy thanks to consecutive inflation reports.

Economist Adam Button stated on the ForexLive platform, “This is a hot number and will add to the worries about sticky inflation.”

In contrast to the Fed’s inflation target of just 2% per year, the CPI grew at an annual rate of 9.1% in June, reaching a 40-year high.

Since March, the central bank has increased interest rates by 450 basis points through eight rate hikes in an effort to rein in price increases.

Prior to that, the central bank slashed interest rates to nearly zero in 2020 following the global COVID-19 outbreak, bringing them down to just 25 basis points.

The Federal Reserve raised interest rates by 25 basis points in March, then by 50 basis points in May, then by 75 basis points in four consecutive increases from June to November.

In December, it increased by 50 basis points, while in February, it increased by 25 basis points. Fed officials have dismissed any notion that the central bank may soon be done with rate hikes in light of this week’s inflation reports.