Wholesale Price Surge Could Press Fed on Interest Rates

(CN) – Inflation borne by the producers of goods surged in April by the largest amount in three months,  the Labor Department said Thursday, and that could press the Federal Reserve to increase interest rates when it meets in June.

The Labor Department said the increase was largely driven upward by rising energy and food costs. But government economists said even if energy and food were removed from the equation, core inflation was still higher for the month.

That assessment comes from the latest producer price index, which measures inflation before it reaches the consumer.

It rose 0.5 percent in April, the largest one-month gain since January. It also represented a change in direction for the index. In March, it had actually declined 0.1 percent.

The department said rnergy prices rose 0.8 percent in April; food costs were up 0.9 percent.

Over the past 12 months, overall prices at the wholesale level have risen 2.5 percent, the largest 12-month gain since early 2012.

Excluding food and energy and trade services, core inflation was up 0.7 percent in April. Over the past 12 months, core inflation is up 2.1 percent. Both gains are records in a data series that goes back to just 2013.

Thursday’s numbers caught many analysts by surprise. As a result they’ll be looking more closely at Friday’s consumer price report, which will show whether inflationary pressures have begun to be felt in American households.

If it has, and the trend continues, that could inspire the Federal Reserve to hike interest rates at its next meeting in June.

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