Surprise Dip: US Producer Prices Buck Expectations, Decline in May.

May saw an unexpected decline in U.S. producer prices due to decreased energy costs, which is another sign that inflation is slowing down following a spike in Q1.

The Bureau of Labour Statistics of the Labour Department said on Thursday that the PPI fell 0.2% in April following an unrevised 0.5% increase in the previous month.

The PPI was expected to increase by 0.1%. The PPI grew 2.2% in the year ending in May, following a 2.3% increase in April.

For the first time in over two years, consumer prices remained constant in May, according to government data released on Wednesday. This increased expectations in the financial markets that the FED would begin reducing interest rates in September.

The interest rate set by the U.S. central bank last July remains unchanged at 5.25%–5.50% as of this writing. In an effort to combat inflation, the Fed has increased interest rate by 525 basis points since March 2022.

Additionally on Wednesday, Federal Reserve officials delayed the beginning of rate reductions until possibly December, with policymakers only anticipating a single quarter-percentage-point decrease this year. It was still anticipated by economists that the Fed will cut interest rates twice this year, beginning in September.

Prayas Sarkar, MBA Finance

Post Graduate Programme of Financial Markets

NISM VA, NCFM Capital Market Dealer Module