U.S. Producer Prices Fall on Declining Gasoline and Food Prices

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U.S. Producer Prices Fall on Declining Gasoline and Food PricesU.S. producer prices stagnated in August, showing inflation remains weak, potentially giving the Federal Reserve more room to hike interest rates.

Food and gasoline prices weighed on the producer price index last month, reported the Labor Department. Producer prices, which track prices paid to U.S. refineries, farms and factories, had earlier gained 0.1 percent in July.

“The Fed has more time to allow monetary policy to work its way through the economy before feeling the need to raise rates,” Jay Morelock, a New York-based economist at FTN Financial, told Reuters.

Analysts had forecasted producer prices to edge up 0.1 percent in August. In the year through August, the prices rose 1.8 percent, compared with 1.7 percent in the 12 months through July. The data was released just as Fed policy makers held a two-day policy gathering. The U.S. central bank, which has maintained target interest rates close to zero since 2008, is expected to raise interest rates in mid-2015.

The PPI in August was weighed by 1.4 percent drop in fuel prices, which had also dropped 2.1 percent in July. Food prices fell 0.5 percent after jumping 0.4 percent the previous month. U.S. traders were slightly unmoved by the report, with all eyes firmly fixed on the Fed’s policy statement that will be released tomorrow.

The declining gasoline and wholesale food prices may ease consumer prices over the next few months.

When adjusted for gasoline and food prices, producer prices- – also called core PPI– rose 0.1 percent in August, compared with a gain of 0.2 percent in July. In the year through August, the core PPI surged 1.8 percent, up from 1.6 percent in July. To register for a free 2-week subscription to ForexMinute Premium Plan, visit www.forexminute.com/newsletter.

To contact the reporter of this story; Jonathan Millet at john@forexminute.com