"Inflation measures both this month and in the prior month have been influenced by tumbling energy prices"
- Laura Rosner, U.S. economist at BNP Paribas
Producer prices in the U.S. did not bring any surprises in August, increasing at the same pace as in the previous month, pointing to muted inflation pressures that should see the Federal Reserve in no hurry to raise interest rates. However, stripping out volatile components such as food and energy, the core PPI measure slightly declined compared to the previous month, inching higher just 0.1% meeting market expectations. Core prices are considered by the Federal Reserve as a better gauge of longer-term inflationary pressure, as they exclude the volatile food and energy categories. On an annual basis, the PPI rose 1.8% up from July's 1.7%, while core PPI climbed to 1.8% compared to 1.6% in the same period last year.
The data came as Fed policy makers were due to start a two-day policy meeting. Data on retail sales, manufacturing and services sectors and housing have suggested the economy is on a sustainable growth path. The tame producer prices report, however, implies the central bank could bide its time before raising its key interest rate from near zero, where it has been since December 2008.The officials on the Federal Open Market Committee also will release an updated set of forecasts for measures including unemployment and growth at the conclusion of their two-day meeting.
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