Inflation in producer prices declined nicely in February–but the statisticians haven’t yet tallied this month’s gasoline costs. The government report showed a large decline in energy costs. Here’s what’s not to like: even excluding food and energy, producer price inflation is still pretty high.
Producer price inflation in total needs to run about 1.25% in order to get consumer price inflation down to 2.00%, which is where I think the Fed wants it.
Business implication: the Fed will hike interest rates some more, and cost pressures on business will continue.