U.S. producer prices rebound in July; trend remains weak amid fragile demand
U.S. producer prices increased by the most in more than 1-1/2 years in July, but the overall trend in producer inflation remained subdued amid signs the economy’s recovery from the COVID-19 recession was faltering.
The jump in producer prices reported by the Labor Department on Tuesday, however, further diminished the risk of deflation, a decline in the general price level. Deflation is harmful during a recession as consumers and businesses may delay purchases in anticipation of lower prices.
Overall, benign inflation should allow the Federal Reserve to maintain its extraordinarily easy monetary policy as it tries to nurse the economy back to health.
“Fed officials will see no reason to be on high alert for inflation pressures after today’s modest rebound in producer prices and there is little reason for them to temper their highly stimulative monetary policy,” said Chris Rupkey, chief economist at MUFG in New York.
11 August 2020