U.S. producer prices rise slightly; underlying inflation tame

U.S. producer prices increased moderately in July, lifted by a rebound in the cost of energy products, while underlying producer inflation retreated, which could allow the Federal Reserve to cut interest rates again next month.

The benign inflation report from the Labor Department on Friday could boost expectations for a half-percentage-point cut at the Fed’s Sept. 17-18 policy meeting.

Financial markets have fully priced in a rate cut following a recent escalation in the bitter trade war between the United States and China, which led to an inversion of the U.S. Treasury yield curve and raised the risk of a recession.

Worries about the trade war’s impact on the economic expansion, the longest on record, prompted the U.S. central bank to lower its short-term rate last week for the first time since 2008.

“Weak…

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