Growing inflation: Wholesale prices jump to highest annual rate in 27 years

The Producer Price Index (PPI), which measures prices at the factory door and inflation pressures before they reach the consumer, jumped 1.2% in July and 9.8% in the past year, according to a Labor Department report released Tuesday.

The 1.2% climb was double the rate economists expected and follows a 1.8% jump in June and a 1.4% rise in May. Core producer prices, which exclude food and energy, jumped 0.7 percent in July after a 0.2 percent June increase.

The rise in wholesale prices marks the highest annual rate since June 1981, or 27 years.

The release of the data on producer prices follows the Labor Department’s report last week that consumer prices jumped by 0.8 percent in July, rising 5.6 percent for the fastest pace in 17 years.

Both reports are sore news for the Federal Reserve. Two Fed officials were "screaming like hawks on Tuesday." (See Inflation Worries The Fed.)

Richard Fisher, president of the Federal Reserve Bank of Dallas, commented,

“Until we have a clear sense of what will prevail, monetary policy makers must remain poised to act if slowing growth fails to contain inflationary pressures."

“Unless the python that is the U.S. economy can quickly pass the recent burst of cost-push pressures, we risk a reinforcing spreading of inflationary impulses and expectations."

“Should this happen and the Fed were to fail to address it, we would run the risk of losing the public’s confidence in our ability to constrain inflation."

Fisher has voted in each of the last two Fed meetings to raise interest rates establishing his hawkish, or strong anti-inflation stance.

The Fed’s policy-setting committee will next meet on September 16.

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