U.S. wholesale prices sank 0.5% in March to mark the biggest decline in almost three years, potentially a sign of further easing in inflation in the months ahead.
Economists polled by The Wall Street Journal had forecast no change in the producer price index. Wholesale costs often herald future inflation trends.
A separate measure of wholesale prices that strips out volatile food and energy costs as well as trade margins rose a scant 0.1% last month, the government said Thursday. That was also below Wall Street’s forecast.
The PPI report captures what companies pay for supplies such as fuel, metals, packaging and so forth. These costs are often passed on to customers at the retail level and give an idea of whether inflation is rising or falling.
Big picture: Inflation is slowing and likely to continue to slow. Waning wholesale price pressures point in that direction.
How quickly inflation slows will determine whether the Federal Reserve halts a series of interest-rate increases soon. The central bank has jacked up a key short-term rate since last year to slow the economy and temper inflation.
The higher rates have to go to tame inflation, the greater the odds of recession. Higher rates have already caused a slump in the housing market and turmoil in the U.S. banking system, as evidenced by the failure last month of Silicon Valley Bank.
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