🇺🇸 The U.S. producer prices rose by +0.4% month-over-month and by +5.4% year-over-year.
Excluding food and energy: +0.3% month-over-month, +4.7% year-over-year
The main driver is high energy costs. Prices for goods rose by 1.1%, while services rose by only 0.1% — diesel fuel alone saw a double-digit increase, coinciding with the rise in oil prices above the $100 mark. In addition, the BLS (Bureau of Labor Statistics) has revised the data for April through July: July, originally reported as unchanged, now stands at +0.1%.
This puts the Fed (Federal Reserve) in an uncomfortable position:
Inflationary pressure is coming from the oil market —that is, from a source that the federal funds rate cannot influence: Higher interest rates do not bring additional crude oil into the market; they merely dampen domestic demand. If the Fed raises rates anyway, it slows the economy due to a price spike that could subside on its own if the conflict eases. If it doesn’t raise rates, it risks triggering a second wave of inflation.