The U.S. Department of Labor on Thursday reported that wholesale price increases mostly slowed last month, providing more evidence of inflation easing.
The Labor Department’s producer price index, which tracks inflation before it reaches consumers, increased by 0.2 percent from July to August. While that number is up from unchanged prices in July, August’s numbers show an annual cooling of inflation.
Last August, prices were up just 1.7 percent compared to August 2023. This is the smallest annual increase since February and is down from a 2.1 percent annual increase in July.
The producer price index includes food and energy prices, which tend to shift monthly. Excluding these prices, the so-called core wholesale prices increased by 0.3 percent from July to August and have increased by 2.3 percent from August 2023.
This stock image shows a person pulling U.S. currency from a wallet. The U.S. Department of Labor reported on Thursday that wholesale prices increased mostly slowed last month, providing more evidence of inflation easing.
Noppphon Pattanasri via Getty Images
August’s numbers suggest that inflation is moving back toward the Federal Reserve’s 2 percent target level just ahead of the Fed’s meeting next week where they are expected to cut its benchmark rate known as the federal funds rate.
Meanwhile, the Labor Department said on Wednesday that its main inflation measure, the consumer price index, which measures the average change in prices, was up by just 2.5 percent last August from August 2023, which is the mildest annual increase in three years.
“Today’s report will add to confidence within the Fed that inflation is indeed on a sustainable path towards 2%,” Carl Weinberg, chief economist at High Frequency Economics, wrote in a note to clients.
The Fed is widely expected to cut rates by a modest quarter-point when they meet next week.
The Fed raised its benchmark rate 11 times in 2022 and 2023 to curb high inflation that both the U.S. and countries around the world faced after the COVID-19 pandemic.
The federal funds rate is the target interest rate range at which banks borrow and lend their excess reserves to each other overnight. The cost of borrowing, including for mortgages, auto loans and credit cards, should go down over time with a series of cuts.
Looking at the job market, the number of Americans filing new applications for jobless benefits recently fell to its lowest level in two months as layoffs remained low.
According to a Labor Department report released on Thursday, jobless claims dropped by 5,000 to 227,000 for the week of August 31. That’s the lowest number of jobless claims since the week of July 6, when 223,000 Americans filed for jobless benefits.
This article includes reporting from The Associated Press.
