The Rabid Capitalist

Professor Glenn A. Okun

Problematic trends in inflation are developing, suggesting that the Fed may have to raise rates further this year.  According to the Bureau of Labor Statistics, the producer price index for final demand rose 0.7% from the previous month.  The August increase in prices paid to US producers was the largest in more than a year, driven by rising energy and transportation costs.  Annually, the PPI increased for a second consecutive month after a year-long decline.  Without food and energy, the PPI increased 0.2%.

The report confirms the CPI data released yesterday, which indicated that a key measure of underlying inflation increased more than anticipated. Petroleum prices were the dominant cause of the largest monthly increase in the consumer price index in more than a year.