The Federal Reserve has been hoping, praying and trying to forecast for a return of 2.0% inflation. At that rate, it can begin to finally raise interest rates. It has been no secret that the Fed presidents and Chair Janet Yellen want to raise rates. That 2.0% mark may not be here yet.
The U.S. Department of Labor released its Producer Price Index (PPI) for Final Demand for the month of September. The headline data ticked a tad higher.
PPI for Final Demand on the headline report was up by 0.3% in September. Bloomberg was calling for a gain of 0.2%, and the prior month headline rate was 0.0%. The gain in the headline year over year was actually up 0.7%, versus 0.0% in August.
Where things tend to matter more is the PPI excluding food and energy. This Core PPI was up 0.2% on the monthly number. Bloomberg was calling for a 0.1% gain, and the gain in August was 0.1%.
The Core PPI reading on a year-over-year basis was up 1.2%, higher than the 1.0% gain in August.
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Then there is an even closer look at real prices on the core market. The PPI core that removes food and energy and also removes trade services was up 0.3% on a monthly reading, but it was up 1.5% on a year-over-year reading (versus 1.2% the prior month).
It is important to remember that the Federal Reserve is at a crossroads. They say routinely that they are data-dependent, but they also say that the 2.0% inflation target might not have to be seen, just anticipated.
September’s PPI for Final Demand is far from a hot inflationary number. That being said, it has higher positives than we have seen for quite some time.
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