US Wholesale Inflation Still Mild Despite Increase
U.S. wholesale prices rose only slightly in January after three straight declines, the latest sign that inflation is posing no threat. It means the Federal Reserve has room to keep interest rates at record lows without worrying about igniting inflation.
The Labor Department said Wednesday that its producer price index rose 0.2 percent last month, the first increase since September. Gasoline and other energy prices fell, while food prices jumped 0.7 percent after dropping sharply in December.
The index measures the cost of goods before they reach consumers. Wholesale prices are what manufacturers and farmers receive for their products.
In the past 12 months, wholesale prices have risen just 1.4 percent, down from a 4.1 percent increase for the 12 months that ended in January 2012. Excluding the volatile food and energy categories, core prices rose 0.2 percent in January. They have risen a mild 1.8 percent over the past 12 months.
"The annual growth rates ... are no threat to the Fed’s inflation target," Paul Dales, an economist at Capital Economics, said in a note to clients. The Fed’s target inflation rate is 2 percent.
If prices were to begin rising rapidly, the central bank might be forced to raise rates to try to slow inflation.