The headline inflation report suggests that the Fed’s interest rate increases may have begun to cool prices

Minneapolis
CNN Business
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The main measure of inflation, wholesale prices, rose 8% in October from a year earlier, according to the latest report from the Bureau of Labor Statistics.

While still historically high, it was the smallest increase since July of last year and much better than expected. It is the second inflation report this month that shows signs of a slowdown in the price rise plaguing the economy.

Economists expected that the producer price index, which measures prices paid for goods and services before they reach consumers, would show an annual increase of 8.3%, down from September Revised 8.4%.

On a monthly basis, producer prices rose 0.2%, missing expectations and even so The revised increase of 0.2% seen in September.

On a yearly basis, the core producer price index — which excludes food and energy, ingredients whose pricing is most vulnerable to market fluctuations — was measured at 6.7%, down from September’s revised annual increase of 7.1%.

On a monthly basis, core PPI prices were flat, the lowest monthly reading since November 2020. In September, core PPI rose by a revised 0.2% from the previous month.

Economists had expected the annual and monthly PPI to measure 7.2% and 0.3%, respectively, Refinitiv estimates.

President Joe Biden announced the October producer price index report on Tuesday and called it “more good news for our economy this morning, and more indication that we’re starting to see inflation moderate.”

“Today’s news — that prices paid by businesses moderated last month — comes a week after news that prices paid by consumers moderated, too,” Biden wrote on Tuesday. “Today’s report also showed that food inflation has slowed – a welcome sign for family grocery bills as we head into the holidays.”

For most of this year, the Federal Reserve has sought to rein in decades-high inflation by tightening monetary policy, including issuing an unprecedented note. Four consecutive interest rate increases of 75 basis pointsor three-quarters of a percentage point.

Jeffrey Roach, chief economist at LPL Financial, said the better-than-expected PPI data reflects an economy that has slowed, with supply moving further into balance.

He said costs associated with transportation and storage, for example, fell for the fourth month in a row, a possible result of the improving global shipping climate. He added that producer costs for new cars had fallen by the most since May 2017.

“Barring geopolitical or financial crises, inflation should continue to slow until 2023,” he said in a statement.

Because the PPI captures price changes that occur more at the initial stage, some consider the report a leading indicator of broader inflationary trends and an indicator of what consumers will eventually see at the store level.

“The PPI reading certainly adds more fuel to the fire for those who feel we may finally be on a downward inflationary trend,” Mike Lowengart, head of model portfolio creation at Morgan Stanley, said in a statement.

consumer price index last week showed that inflation slowed to 7.7% of 8.2% year-on-year for consumer goods, surprising investors and giving Wall Street its biggest boost since 2020.

CPI data was “reassuring”, Federal Reserve Vice Chairman Elle Brainard said Mondaywhich suggests that rate hikes appear to be taking hold, and if economic data continues to show inflation declining, the central bank could scale back its future rate hikes.

“When you look at the inflation numbers, there is some evidence that we have peaked, but are we going down quickly?” Stephen Ricciotto, chief economist at Mizuho Americas, told CNN Business.

Ricchiuto noted that the October numbers are only two steps below what was seen in September.

“These are not the kinds of things that would tell the Fed to stop tightening rates,” he said. However, they may tell you [that] You don’t need 75 basis points.”

CNN’s DJ Judd and Matt Egan contributed to this report.