Forex Factory: US Producer Prices Remain Flat
The unchanged PPI reading and decline in core PPI may indicate a shift in inflation pressures, with potential implications for monetary policy and the broader economy, including the forex factory and currency markets.
The US Producer Price Index (PPI) remained unchanged in February, contrary to expectations of a 0.3% increase, indicating a slowdown in wholesale inflation. The flat reading for overall PPI and decline in core PPI may ease concerns about inflation ahead of the Federal Reserve's upcoming policy meeting.
The PPI, a leading indicator of pipeline inflation pressures, was unchanged from January's revised 0.6% jump. Excluding food and energy, core PPI decreased 0.1%, the first negative reading since July. Core PPI excluding trade services increased 0.2%. The slowdown in wholesale inflation follows the latest Consumer Price Index, which showed annual inflation slowed for the first time in five months.
Energy prices fell 1.2% for the month, while wholesale egg prices rose 28.1% on a monthly basis, slowing from a 44% increase in January. The annual increase in wholesale egg prices was 136.6%. The Fed's 2% inflation target is still above the 3.2% year-over-year increase in headline producer prices.
The markets are assigning near 100% odds that the Fed will keep interest rates on hold, given the easing concerns about inflation. The slowdown in wholesale inflation may have implications for the forex factory, as a stable interest rate can impact currency exchange rates and trading decisions.