The monthly gain in the producer price index, which measures inflation pressure before it reaches consumers, followed a 0.6% increase in April and a 1% jump in March, the Labor Department reported Tuesday.
With inflation rising in a fast-rebounding economy, the Federal Reserve is poised this week to discuss when it will take its first steps toward dialing back its ultra-low interest rate policies. It will be a fraught discussion.
American consumers absorbed another surge in prices in May—a 0.6% increase over April and 5% over the past year, the biggest 12-month inflation spike since 2008.
The discussions, revealed in the minutes of the Fed’s April meeting released Wednesday, marked the first time the central bank has even hinted that the time could be approaching to consider reducing the Fed’s $120 billion monthly bond purchases.
The acceleration in prices, which has been building for months, has unsettled financial markets and raised concerns that it could weaken the economic recovery from the pandemic recession.
Janet Yellen’s comments reignited fears raised by some economists and business leaders that trillions of dollars in new spending that the government has authorized since March 2020 could lead the Federal Reserve to take steps that cool off the economy.
Plastic, paper, sugar, grain and other commodities are all getting more expensive as demand outpaces supply. Companies are also paying more for shipping as fuel costs rise and ports experience longer delays because of congestion.
Federal Reserve Chairman Jerome Powell Powell said he thinks the inflation pressures that are now building in the U.S. economy, partly in response to clogged supply chains that have created shortages of some goods and components, will prove temporary.
Over the past year, wholesale prices are up 2.8%, the largest 12-month gain at the wholesale level in more than two years.
Consumer prices are up 1.7% over the past year, a still moderate performance for inflation, which is running below the Federal Reserve’s 2% target for price increases.
Federal Reserve Chairman Jerome Powell on Wednesday underscored the Fed’s commitment to reducing unemployment to multi-decade lows, while signaling little concern about the risk of potentially high inflation or financial market instability.
Inflation for all of 2020 rose a modest 1.4%, well below the Federal Reserve’s 2% target. Analysts believe inflation will remain subdued with the U.S. economy still unable to break out of a pandemic-induced downturn.
Prices for used cars and trucks are up 10.3% in the past 12 months. The September increase in used vehicle prices was the largest monthly increase since February 1969.
The Labor Department reported Friday that the August increase in the consumer price index reflected some moderation following big gains of 0.6% in both June and July.
Behind the Fed’s new thinking is an ailing economy in the grip of a viral pandemic and a stubbornly low inflation rate that has long defied the Fed’s efforts to raise it.
Consumer prices edged up a slight 0.1 percent in September as energy prices retreated after a big gain in August.
Consumer prices rose in June from a year earlier at the fastest pace since February 2012, lifted by more expensive gas, car insurance and higher rents.
Consumer prices increased at 0.2 percent pace in February, underscoring that inflation pressures appear to be muted for now.
The chief investment strategist for Fifth Third Bank says the economy is in the seventh inning of its recovery, which is "good news." But headwinds in the labor market could be limiting the potential for growth.
The prices for nine of the 12 gifts listed in the holiday carol stayed the same or became cheaper this year, according to the 33rd annual PNC Wealth Management Christmas Price Index released Thursday.
