US Produces Prices Flat in August Easing Fed Need to Hike

U.S. producer prices were flat in August, pointing to muted inflation pressures that should see the Federal Reserve in no hurry to raise interest rates.

The Labor Department said on Tuesday its producer price index for final demand was unchanged as gasoline and food costs fell. Producer prices had edged up 0.1 percent in July. Economists had expected a 0.1 percent increase last month.

In the 12 months through August, producer prices increased 1.8 percent after rising 1.7 percent in July.

 
The report came as Fed officials were due to start a two-day policy meeting. Data on retail sales, manufacturing, the services sector and housing have suggested the economy is on a sustainable growth path.

The tame producer prices report, however, implies the U.S. central bank could bide its time before lifting its benchmark overnight lending rate from near zero, where it has been since December 2008.

Last month, prices at the factory gate were held back by a 1.4 percent decline in gasoline prices, which followed a 2.1 percent fall in July.

Food prices slipped 0.5 percent after rising 0.4 percent in July. Prices received for services at the final demand level increased 0.3 percent after nudging up 0.1 percent in July.

via Reuters

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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza