Inflation fell to 2.3% in April, producer price index shows in encouraging sign

Inflation fell four-tenths of a percentage point to a 2.3% annual rate in April, as measured by the producer price index.

On a month-to-month basis, the wholesale price index increased by 0.2%, the Bureau of Labor Statistics reported Thursday morning.

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The report is encouraging news. It shows inflation not far from the Federal Reserve’s 2% target and well below the rate registered in other inflation gauges.

The decrease is an indication that inflationary pressures are abating in the face of the Fed’s campaign to slow economywide spending by hiking interest rates.

Given the trend line over the past several months, inflation as measured by the PPI peaked over last year and is coming down in a meaningful way. Annual wholesale inflation reached its zenith in April 2022. Trends in producer prices eventually trickle down to households.

Still, details from Thursday’s report showed that inflation is higher than the Fed would like and inflicting pain on businesses and households. Core inflation, a measure of price gains that strips outs movements in food, energy, and transportation, stood at a 3.2% annual rate in April — down two-tenths of a percentage point from the previous month.

“Core producer goods price pressures were most intense the quarter after Russia invaded Ukraine last year, and those days look further and further away from ever returning after the Fed hiked rates aggressively the last year,” wrote Chris Rupkey, the chief economist for FWDBONDS.

The high inflation of the past two years has battered household purchasing power and undercut support for President Joe Biden’s economic agenda.

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Thursday’s PPI report comes a day after the consumer price index, which is even more closely watched, was released. The CPI fell to 4.9%, a slight drop from the month before. The annual CPI inflation rate has been trending down since peaking last June.

The Fed has been hiking rates for more than a year. Last week, the Fed opted to hike rates once again, even as some urged the central bank to pump its brakes because of upheaval in the banking system and the possibility of a recession.