Posted December 12, 2022

Producer prices easing, rising costs in some categories

According to the National Association of Manufacturers' Economic Reports, producer prices for final demand goods and services rose 0.3% for the third straight month in November.

Over the past 12 months, producer prices for final demand goods and services have risen 7.4%, the lowest since May 2021. Core producer prices increased 4.9% year-over-year, continuing to decelerate since hitting a record 7.1% in March and the slowest since April 2021.

The Reports author Chad Moutray said on the one hand, there are signs that raw material costs continue to decelerate, which is encouraging, while remaining at highly elevated levels. Yet, on the other hand, prices continue to accelerate or exceed expectations in some categories, such as for food and for core inflation. That will continue to put pressure on the Federal Reserve in its fight against pricing pressures.

Following the fourth consecutive 75-basis-point rate hike at its November 1–2 meeting, the Federal Open Market Committee is likely to step down to a 50-basis-point rate increase at the conclusion of its Dec. 13–14 meeting this week. [Editor's note: Fox News reported that "The Federal Reserve  raised its benchmark interest rate by 50 basis points on Wednesday, December 14, slowing its campaign to cool the economy amid early signs that stubbornly high inflation is finally starting to ease.

 The widely expected move puts the key benchmark federal funds rate at a range of 4.25% to 4.5%, the highest since before the 2008 financial crisis, from near-zero in March. It marks the seventh consecutive rate increase this year and puts interest rates in firmly restrictive territory."]

The Fed will likely further increase the federal funds rate by 50 or 75 basis points in total at its Jan. 31–Feb. 1 and March 21–22 meetings before hitting the pause button, assuming it is ready to do so at that time (which would hinge on incoming inflation and employment data).