US wholesale inflation rises 2.2% in September, biggest year-on-year gain since April

WASHINGTON (AP) – U.S. wholesale prices rose last month at the fastest pace since April, suggesting inflationary pressures remain despite a year and a half of higher interest rates.

The Labor Department reported Wednesday that its producer price index, which measures inflation before it reaches consumers, rose 2.2 percent from a year earlier. That was up from a 2% increase in August.

In month-on-month terms, producer prices rose 0.5% from August to September, down from 0.7% from July to August.

Excluding volatile food and energy prices, so-called core inflation rose 2.7% in September from a year earlier and 0.3% from August. The Federal Reserve and many outside economists pay particular attention to core prices as a good sign of where inflation might be headed.

Wholesale prices have been rising more slowly than consumer prices, raising hopes that inflation may continue to ease as producer costs trickle down to consumers. But Wednesday’s figures, boosted by a rise in goods prices, rose more than economists had expected last month. Wholesale energy prices rose 3.3% from August to September and food prices rose 0.9% after falling 0.5% from July to August.

Last year, inflation hit highs not seen in four decades, prompting the Fed to raise interest rates aggressively. The central bank has raised its benchmark rate 11 times since March 2022. These higher borrowing costs have helped cool inflation and curb a still solid labor market.

There are growing expectations that the Fed may decide to leave interest rates on hold for the rest of the year. On Monday, two Fed officials suggested as much the central bank may leave its reference rate unchanged at its next meeting in three weeks, helping start a rally in bonds and stocks.

Rubeela Farooqi, chief U.S. economist at High Frequency Economics, said last month’s higher producer prices “probably do not change the outlook for Fed policy. Our baseline remains that rates are at their peak. For the Fed, geopolitical developments will be an additional risk factor that will likely keep policymakers moving forward cautiously.”

Meanwhile, the economy has remained stronger than expected. Optimism is growing that the Fed can achieve a “soft landing,” raising rates enough to control inflation without plunging the economy into a deep recession.

On Thursday, the Labor Department will release its closely watched consumer price index for September. Last month, the department reported that, compared with 12 months earlier, core consumer prices rose in August at the lowest rate in nearly two years.