Latest readings on inflation could keep Fed from raising interest rates
The cost of wholesale goods was flat in July thanks to lower gas prices, but not enough to ease inflation worries.
Wholesale prices were flat in July and inflation pressures in the guts of the economy eased, adding to recent evidence of a slowdown in the rising cost of living.
The producer-price index was unchanged in July, the government said Thursday. Wholesale prices had declined in June.
Lower gas prices largely explained the tame readings on wholesale prices in the past two months, but the cost of other key commodities have also slackened.
Both consumer- and wholesale-price increases have slowed enough in the past few months to raise doubts about whether the Federal Reserve will raise interest rates in September.
The latest snapshot of consumer prices, for instance, pointed to a small deceleration in inflation in July for the second month in a row.
In the 12 months ending in July, the cost of wholesale goods and services rose 4.7%. It's still too high, but it's slowed from 5.5% in the prior month and a 3 1/2-year high of 5.9% in May.
Wholesale prices are where inflation shows up first, and these prices tend to hint at future changes in what consumers pay.
Key details: A separate price gauge known as the core rate, which strips out food and energy, rose at a sharper 0.4% clip in July. The increase was a tick higher than the Wall Street forecast.
The 12-month increase in the core rate slipped to 4.7% from 5%, however.
Perhaps more positively, the cost of partly finished goods and raw materials declined again. These costs in the earlier stage of production point to easing inflationary pressures.
Prices for partly finished goods fell for the second month in a row, suggesting they peaked a few months ago.
The cost of raw materials dropped 1.8% on the back of a 6.4% plunge in June.
Lower energy prices played a big role in these declines, but prices were also more muted for other wholesale goods. What's less clear is whether these prices will continue to ease after another rise in oil prices.
Big picture: High inflation is a big problem for households, businesses and the broader economy. The Fed could still raise interest rates unless price increases let up some more.
The central bank will wait for the next batch of inflation reports in late August and early September before making a decision.
Looking ahead: "Inflation, while still way above the Federal Reserve's 2% target, is showing signs of stabilization following the oil-driven surge since the Iran war began earlier this year," said Glen Smith, chief investment officer at GDS Wealth Management.
Market reaction: The Dow Jones Industrial Average DJIA and S&P 500 SPX were set to rise slightly in Thursday trades.
-Jeffry Bartash
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