Latest news with #UScentralbank
Reuters
5 days ago
- Business
- Reuters
US producer inflation heats up as goods, services prices soar
WASHINGTON, Aug 14 (Reuters) - U.S. producer prices increased by the most in three years in July amid a surge in the costs of goods and services, suggesting a broad pickup in inflation was imminent, posing a dilemma for the Federal Reserve. The stronger-than-expected producer inflation report from the Labor Department on Thursday followed data this week showing consumers paid higher prices for services like dental care and airline fares last month. There were also no signs of further labor market deterioration in early August. Economists had hoped that moderate services price gains would blunt the inflationary impact of higher goods prices from President Donald Trump's sweeping import tariffs. The U.S. central bank puts more emphasis on services inflation given the economy is services-driven. Though financial markets continued to anticipate the Fed would resume rate cuts in September, some economists urged caution. "This is a kick in the teeth for anyone who thought that tariffs would not impact domestic prices in the United States economy," said Carl Weinberg, chief economist at High Frequency Economics. "This report is a strong validation of the Fed's wait-and-see stance on policy changes." The producer price index for final demand jumped 0.9% last month, the largest advance since June 2022, after being unchanged in June, the Labor Department's Bureau of Labor Statistics said. Economists polled by Reuters had forecast the PPI rising 0.2%. A 1.1% jump in the costs of services accounted for more than three quarters of the broad-based increase in the PPI. The largest gain in service prices since March 2022 followed a 0.1% dip in June. More than half of the increase was driven by a 2.0% advance in trade margins, including for machinery and equipment wholesaling. Portfolio management fees soared 5.8%, reflecting a stock market rally. Hotel and motel room prices rebounded 3.1%, while airline fares rose 1.0%. The cost of transporting freight by road increased 1.0%. Goods prices vaulted 0.7% after climbing 0.3% in June. A 1.4% surge in food prices accounted for 40% of the broad increase in the cost of goods. Food prices were driven by a 38.9% acceleration in the cost of fresh and dry vegetables. Farmers have reported worker shortages as the Trump administration rounds up undocumented immigrants. Wholesale beef prices jumped 4.6%, while those for eggs rebounded 7.3%. Coffee prices increased 1.1%. Excluding food and energy, goods prices increased 0.4%, with strong rises in the costs of steel, aluminum and primary nonferrous metals. There were also sharp price increases for home electronic equipment, sporting and athletic goods. In the 12 months through July, the PPI increased 3.3% after advancing 2.4% in June. Economists said the data suggested businesses were not fully absorbing the higher costs from tariffs as some had argued in the wake of a mild increase in consumer prices in July. "There continues to be clear evidence that prices of a number of durable goods are being passed through to consumers," said Michael Hanson, an economist at J.P. Morgan. "If these data survive subsequent revisions, then it might suggest that there are price increases taking place at the wholesale level that are likely to take longer to find their way into the prices facing consumers." Stocks on Wall Street were lower. The dollar advanced against a basket of currencies. U.S. Treasury yields rose. With the July report, the BLS ended the calculation and publication of approximately 350 indexes, including data from the PPI Final Demand-Intermediate Demand, special index, industry and commodity classifications. The agency has suffered years of underfunding under both Republican and Democratic administrations, a situation worsened by an unprecedented campaign by President Donald Trump's White House to remake the federal government through deep spending cuts and mass layoffs of public workers. The resource constraints have impacted the closely watched employment report and also resulted in the suspension of data collection for portions of the CPI basket in some areas across the country. This has raised concerns about the quality of the government-produced economic data, long viewed as the gold standard. The nomination of Heritage Foundation economist E.J. Antoni, a critic of the BLS, to head the statistics agency, is also adding another layer of worry over data quality. Economists across political ideologies have described Antoni as unqualified for the position. With the PPI and CPI reports in hand, economists estimated the core Personal Consumption Expenditures (PCE) Price Index increased 0.3% in July after a similar gain in June. That would raise the year-on-year increase in the so-called core PCE inflation to 2.9% from 2.8% in June. Core PCE inflation is one of the measures tracked by the Fed for its 2% target. The Fed left its benchmark overnight interest rate in the 4.25%-4.50% range last month for the fifth straight time since December. Some economists said it should only consider cutting rates next month if July producer and consumer price data proved to be anomalies and nonfarm payroll gains remained below 75,000 jobs in August. "If those three conditions are not met, it would be irresponsible from a central bank credibility perspective to cut rates," said Brian Bethune, an economics professor at Boston College. A separate report from the Labor Department showed initial claims for state unemployment benefits dropped 3,000 to a seasonally adjusted 224,000 for the week ended August 9. The labor market has split into low firings and tepid hiring as businesses navigate trade policy. The number of people receiving benefits after an initial week of aid, a proxy for hiring, slipped 15,000 to a seasonally adjusted 1.953 million during the week ending August 2, the claims report showed. "While the pace of hiring has slowed, firms are not resorting to widespread layoffs," said Stephen Stanley, chief U.S. economist at Santander U.S. Capital Markets. "This should be reassuring at a time when Fed officials look to be panicking over weak summer payroll readings for a second consecutive year."
Reuters
6 days ago
- Business
- Reuters
Fed's Goolsbee signals door open to rate cut in fall
Aug 13 (Reuters) - Chicago Federal Reserve Bank President Austan Goolsbee said on Wednesday he is uneasy assuming that tariffs will not push up inflation and is unconvinced that the U.S. labor market is deteriorating. Those premises have been cited by a few of his colleagues for supporting interest rate cuts by the U.S. central bank. However, Goolsbee left the door wide open to aligning with them by the Fed's September 16-17 policy-setting meeting. "All of the meetings this fall, they are going to be live meetings," with decisions based on the latest data, Goolsbee told reporters after a speech. "I'm not implying that I can't reach a decision by meetings that are coming up, because like I say, we're going to get some good and important pieces of information that I'm going to add to the ones that we've gotten for the last three months." If inflation is convincingly falling and the labor market is cooling, "that's not hard ... when things are cooling the Fed tries to act countercyclically," he said. The Fed left short-term borrowing costs in the 4.25%-4.50% range at its July 29-30 meeting, drawing dissents from Vice Chair of Supervision Michelle Bowman and Governor Christopher Waller who wanted to cut rates to head off what they worried was incipient labor market weakness. To Goolsbee, the signs are more mixed. While monthly job gains, after recent revisions, slowed sharply in the last three months to an average of 35,000, the drop could very well reflect a decline in immigration rather than an underlying weakening in demand, he said. Other data like the unemployment rate of 4.2% and low layoff rate suggest the labor market remains solid, he said. Goolsbee also said he needs to see multiple months of good inflation readings to feel comfortable about a rate cut. "I envision we're going to keep learning information and keep going on the path; the more convincing it is that we are on path to 2% inflation, the faster I think we can go to what is r-star," he added, using an economists' term for the level at which interest rates should settle when the economy is running neither too hot or cold. "You could cut, one, in anticipation if you think you're on the path, as long as you're laying out the criteria of what you're doing ... and if we start getting information that contradicts that then we would stop cutting or go the other way: that's an entirely possible path, outcome, or whatever you want to call it," he said. "The way I think of it is not a cliff - it's not, I'm going to reach an epiphany one day," he said, and cut rates immediately to where they are expected to settle in the long term, which Fed policymakers generally estimate is around 3%.
Reuters
7 days ago
- Business
- Reuters
Fed's policy rate should stay on hold for now, Schmid says
Aug 12 (Reuters) - The U.S. central bank should not take tariffs' muted effect on inflation so far as an opportunity to cut interest rates, but rather as a sign that monetary policy is "appropriately calibrated," Kansas City Federal Reserve President Jeffrey Schmid said on Tuesday, in remarks that contrast with the increasingly dovish tone of some of his colleagues. "With the economy still showing momentum, growing business optimism, and inflation still stuck above our objective, retaining a modestly restrictive monetary policy stance remains appropriate for the time being," Schmid said in remarks prepared for delivery to an economic development conference in Oklahoma. "While increased tariffs seem to be having a limited effect on inflation, I view this as a rationale for keeping policy on hold rather than an opportunity to ease the stance of policy." Schmid said his "patient approach" to changing the policy rate, currently in the 4.25%-4.50% range, shouldn't be seen as a "wait and see" approach because he does not think that it will be clear in the next few months whether tariffs are pushing up on prices temporarily or persistently. Rather, he said, he feels the current policy rate is not very far above the neutral rate, where activity is neither stimulated nor restrained, and the labor market is still looking solid despite a sharp drop in job growth in recent months. And while the cooling labor market is keeping a lid on the pass-through of tariffs into inflation, boosting demand aggressively could raise the risk of an outsized increase in price pressures, Schmid said. "In my view, and in discussion with my contacts, growth remains solid, inflation remains too high, and therefore policy should remain modestly restrictive," he said. "That said, as I stated earlier, inflation is determined by the balance of supply and demand, and if I see indications that demand growth is weakening significantly, I will adjust my views accordingly."
Bloomberg
08-08-2025
- Business
- Bloomberg
Fed's Musalem Says Officials Missing More on Inflation Than Jobs
Federal Reserve Bank of St. Louis President Alberto Musalem said he supported last week's decision by policymakers to leave interest rates steady, adding the US central bank is still missing more on the inflation side of its mandate. 'The economy is such that we are missing on our inflation target,' Musalem said Friday during an event in Itta Bena, Mississippi. 'We are not missing on our employment mandate,' and the labor market is close to full employment, he said.
ABC News
17-07-2025
- Business
- ABC News
Live market updates: Traders shrug off Fed worries to send Wall St to fresh records
Traders have put aside concerns about the independence of the US central bank, with decent economic data sending Wall Street to yet another record high. Follow the day's financial news and insights from our specialist business reporters on our live blog. Disclaimer: this blog is not intended as investment advice.
