Inflation fell to 2.7% in March in producer price index
Zachary Halaschak
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Inflation plunged to a 2.7% annual rate in March, as measured by the producer price index.
On a month-to-month basis, the wholesale price index declined by 0.5%, the Bureau of Economic Analysis reported Thursday morning — more encouraging inflation news. The decrease is an indication that inflationary pressures are abating in the face of the Federal Reserve’s campaign to slow economywide spending by hiking interest rates.
Nevertheless, inflation is still running much hotter than the central bank’s target and dinging household purchasing power. Prices paid by producers eventually translate to prices paid by households.
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Given the trendline over the past several months, it appears as though inflation as measured by the PPI peaked and is on its way down. Annual wholesale inflation reached its zenith in March 2022.
The Fed’s target for inflation is 2%, although it uses a different gauge to assess the target.
The high inflation of the past two years has battered household purchasing power and undercut support for President Joe Biden’s economic agenda.
Thursday’s PPI report comes a day after the consumer price index, which is even more closely watched, was released. The CPI fell to 5%, a notable drop from the month before. The annual CPI inflation rate has been trending down since peaking last June.
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The Fed has been hiking rates for more than a year now. This week the minutes of the Fed’s last meeting in March were released and showed that central bank staff now expect a recession this year.
“Given their assessment of the potential economic effects of the recent banking-sector developments, the staff’s projection at the time of the March meeting included a mild recession starting later this year, with a recovery over the subsequent two years,” the Fed said in a readout of the meeting.