Inflation Eases as U.S. Department of Labor Reports on Interest Rates

Labor Department Insights on Inflation and Interest Rates

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.

Analyzing the Producer Price Index

• Last August, prices rose just 1.7 percent compared to August 2023.
• This is the smallest annual increase since February.
• It 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.

Implications for the Federal Reserve

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 discuss potential cuts to its benchmark interest rate known as the federal funds rate. Meanwhile, the Labor Department indicated that its main inflation measure, the consumer price index, was up by just 2.5 percent last August from August 2023, marking the mildest annual increase in three years.