US PPI Flat in August Easing Inflation Pressure

U.S. producer prices were flat in August, pointing to benign inflation pressures that could weigh on the Federal Reserve’s decision whether to hike interest rates next week.

The unchanged reading in the producer price index last month followed a 0.2 percent gain in July, the Labor Department said on Friday. The drag on producer prices from lower crude oil prices and a strong dollar was offset by an increase in profit margins for apparel, footwear and accessories retailing.

In the 12 months through August, the PPI fell 0.8 percent after a similar decline in July. It was the seventh straight 12-month decrease in the index.

Tame inflation despite a rapidly tightening labor market poses a dilemma for Fed officials who are contemplating raising rates for the first time in nearly a decade.

Though job openings are at a record high and the unemployment rate is at a 7-1/2-year low, wage gains have been lackluster. That has helped keep inflation well below the Fed’s 2 percent target.

The U.S. central bank’s policy-setting committee meets on Sept. 16-17. The likelihood of a lift-off in the Fed’s benchmark overnight interest rate has been diminished by recent financial market volatility, which was sparked by concerns over China’s economy.

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