Wholesale Inflation Expected To Jump

ben bernanke

WASHINGTON (AP) — Wholesale prices likely jumped in January, pushed higher by rising gasoline and food costs.

Economists surveyed by Thomson Reuters expect wholesale prices rose 0.7 per cent in January following a more moderate 0.2 per cent rise in December.

The economists believe that excluding food and energy, core wholesale prices will show a much smaller advance of 0.1 per cent following a flat reading in December.

The labour Department is scheduled to release its January Producer Price Index at 8:30 a.m. EST Thursday. The PPI measures price pressures before they reach consumers.

Overall wholesale prices have been buffeted by energy prices in recent months. Wholesale prices had surged by 1.8 per cent in November because of rising energy prices. After being up for two months, energy prices had fallen in December.

Economists believe that inflation will not represent a threat to the economy through the rest of this year given their expectations that the unemployment rate is going to remain elevated for much of this year, keeping a lid on wage pressures.

The absence of inflation pressures has allowed the Federal Reserve to keep interest rates low in an effort to spur economic growth.

The central bank released the minutes of its Jan. 26-27 meeting on Wednesday. At that meeting, Fed officials kept the target for the federal funds rate, the interest that banks charge on overnight loans, at zero to 0.25 per cent, where it has been since December 2008. They repeated their pledge to keep rates “exceptionally low” for an “extended period.”

However, the minutes showed that one Fed official, Thomas Hoenig, president of the Federal Reserve Bank of Kansas City, objected to maintaining the pledge without changing the wording. Hoenig argued, according to the minutes, for a change in the language to say rates would remain low for “some time” rather than an “extended period.”

Hoenig argued that such a change would give the Fed more flexibility to start raising rates, the minutes said.

Federal Reserve Chairman Ben Bernanke suggested in comments last week that the Fed was still months away from raising rates. Many private economists believe that the Fed’s first rate increase will not come until the second half of this year and some believe the central bank could keep rates unchanged for the entire year, given the absence of inflation and what they believe will be a sluggish recovery.

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