US wholesale inflation cooled in July in sign that price pressures are continuing to ease

WASHINGTON — US wholesale price growth moderated in July, suggesting inflationary pressures are easing as the Federal Reserve moves closer to cutting interest rates, likely to take effect next month.

The Labor Department reported Tuesday that the producer price index, which tracks inflation before it reaches consumers, rose 0.1% from June to July and 2.2% from a year earlier.

Excluding food and energy prices, which fluctuate from month to month, core wholesale prices were unchanged from June and rose 2.4% from July 2023. The gains were milder than analysts had expected and nearly in line with the Fed’s 2% inflation target.

The producer price index can be an early sign of where consumer inflation is headed. Economists also watch it because some of its components, notably health care and financial services, feed into the Fed’s preferred gauge of inflation: the personal consumption expenditures (PCE) index.

On Wednesday, the Labor Department will release the most familiar measure of inflation, the consumer price index. According to a survey by data firm FactSet, meteorologists estimate that consumer prices rose 0.2% from June to July, after falling 0.1% the previous month, and were up 3% from July 2023.

Inflation has tumbled from a four-decade high in mid-2022. But as Americans prepare to vote in November’s presidential election, many are still unhappy about consumer prices, which are nearly 19% higher than they were before the spring 2021 surge. Many blame President Joe Biden, but it’s unclear whether they will hold Vice President Kamala Harris responsible as she seeks the presidency.

In the fight against high inflation, the Fed raised its benchmark interest rate 11 times in 2022 and 2023, reaching a 23-year high. From 9.1% in June 2022, year-on-year consumer price inflation has fallen to 3%.

The US jobs report for JulyThe much weaker-than-expected earnings report reinforced widespread expectations that Fed policymakers will cut interest rates when they meet in mid-September to support the economy. The jobs report showed the unemployment rate rose for a fourth straight month to 4.3%, still healthy by historical standards but the highest level since October 2021.

Over time, a series of rate cuts by the Fed would likely lower borrowing costs across the economy — for mortgages, auto loans and credit cards, as well as business loans. Stock prices could also rise as a result.

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