U.S. wholesale inflation eased last month due to lower food costs

WASHINGTON (AP) – In the United States, growth in wholesale prices slowed sharply last month as food costs eased, a sign that inflationary pressures may be easing.

The government’s producer price index fell 0.1% from January to February, after a 0.3% rise from December to January, which was revised sharply lower. Compared to a year ago, wholesale prices rose by 4.6%, which is a big drop from the 5.7% annual increase in January.

The main driver of the price drop was the significant drop in the wholesale price of eggs, which fell by 36.1% in February alone. Egg prices had risen amid a widespread outbreak of bird flu.

Producer price data reflects the prices charged by producers, farmers and wholesalers, and it feeds into a gauge of inflation that the Federal Reserve tracks closely. It can provide an early indication of how quickly consumer inflation will rise.

The numbers follow Tuesday’s consumer price report, which showed inflation is still rising faster than the Federal Reserve would prefer. Core prices, which exclude volatile food and energy costs and are seen as a better gauge of longer-term inflation, rose 0.5% from January to February, the most since September. That’s a much higher rate than meets the Fed’s 2% annual target.

But the failure of two major banks since Friday has fueled fears of financial instability and complicated the Fed’s upcoming decisions on how high and how fast to raise interest rates to fight inflation. Despite chronically high inflation, some economists expect the central bank to end its year-long streak of rate hikes when it meets next week.

Many other analysts forecast only a modest quarterly rate hike next week, rather than the half-point Fed hike they had previously expected. For now, the Fed can focus on boosting confidence in the financial system before it resumes its long-term quest to tame inflation.

It would be a dramatic shift just a week after Chairman Jerome Powell suggested to a Senate committee that if inflation did not ease, the Fed could raise its benchmark interest rate by a significant half point at its March 21-22 meeting. . When the Fed raises its prime rate, it usually leads to higher interest rates on mortgages, auto loans, credit cards and many business loans.

Testifying before a House committee the next day, Powell cautioned that no final decision had been made on what the Fed would do at the March meeting.