US producer prices rose 2.1% from last year, most since April, as inflation proves hard to shake

WASHINGTON — U.S. producer prices rose in March from a year earlier at the fastest pace in nearly a year, but the gains were smaller than economists expected. And wholesale inflation declined month over month.

The Labor Department said Thursday that the producer price index – which measures inflation pressures before they reach consumers – rose 2.1% last month from March 2023, the biggest year-on-year jump since April 2023. But economists had said the U.S. Ministry of Labor predicts an increase of 2.2%. to a survey among forecasters by the data company FactSet. And compared to February, wholesale prices rose just 0.2%, compared to a 0.6% increase in February.

Excluding volatile food and energy prices, so-called core wholesale prices rose 0.2% last month from February, the second decline in a row, and 2.4% from March 2023. The year-on-year increase in core producer prices was the biggest since August.

The slightly better-than-expected producer prices come at a time of concern that progress on inflation has stalled, casting doubt on whether and when the Federal Reserve will cut rates.

Despite aggressive rate hikes by the Fed, inflation had been steadily declining after peaking in mid-2022. But the improvements have proven harder to achieve recently.

The Labor Department reported Wednesday that the consumer price index rose 3.5% last month from a year earlier, the second straight increase in annual inflation, which remains well above the Fed’s 2% target. Consumer prices rose 0.4% last month compared to February, matching the increase in January. They have not fallen on a monthly basis since October.

Fighting the resurgence of inflation that began in spring 2021, the Fed raised its benchmark interest rate 11 times between March 2022 and July 2023, bringing it to a 23-year high. The central bank has indicated that it expects to cut interest rates three times this year – a policy reversal that was eagerly awaited on Wall Street. But the recent stubbornness of inflation is casting doubt on when the rate cuts will begin and whether the Fed will actually be able to deliver three of them this year.

Investors on Wall Street had originally hoped for a first rate cut in March. But that didn’t happen and inflation rates have stabilized. According to CME’s FedWatch tool, a majority of investors are only now expecting a rate cut at the Fed’s September meeting.