Wholesale price inflation slows last month as gas, food costs fall

Key Points:

• Wholesale inflation eased in July, with the producer price index rising 4.7% year-over-year, down from 5.5% in June, and monthly wholesale prices remaining flat, signaling potential further cooling of consumer inflation.
• Core wholesale inflation, which excludes food and energy, also declined to 4.2% year-over-year in July, indicating reduced inflationary pressures beyond volatile sectors.
• Despite recent drops, rising gas prices in late July and early August could push inflation higher in the upcoming reports, posing a challenge to sustained inflation reduction.
• The cooling in wholesale prices gives the Federal Reserve more flexibility to keep interest rates steady at its September meeting, amid debates on whether to raise rates to combat inflation or hold in hopes of continued easing.
• Economists expect the Fed’s preferred inflation gauge, the personal consumption expenditures (PCE) index, to show core inflation steady at around 3.3% in July, which remains above the Fed’s 2% target and may concern policymakers.