Upstream Inflation Hits A 17 Year High, Rate Decisions Growing More Complicated

Daily Forex Fundamentals | Written by DailyFX | Jul 15 08 13:21 GMT |

US Producer Price Index (YoY) (JUN)
(Headline) (Core)
Actual: 9.2% 3.0%
Expected: 8.7% 3.2%
Previous: 7.2% 3.0%

The Federal Reserve's next move is growing less and less clear for the market. Just as fear of another credit and financial market crisis builds, inflation figures are once again taking to new recent record highs. The upstream producer price index figure for June reported the biggest jump in monthly pressures since November and the sixth consesuctive increase. More concerning than the 1.8 percent jump in factory prices from May however was the annual rise (the measure more closely followed by policy makers). From the same month a year ago, headline inflation pressures surged 9.2 percent - the quickest pace since July of 1981.

Looking to the details of the report broad report, the momentum in prices was clearly centered on volatile goods like food and energy. At the comsumer level, the cost of food and energy rose 1.5 percent and 6.0 percent in June respectively. For the endline consumer, this jumpled to 9.0 percent surge in gasoline. However, outside of these already well-known groups, pressures were more controled. Excluding those two specific components, inflation rose a mere 0.2 percent with the annual pace holding at 3.0 pecent for the third consecutive month. Nonetheless, both of these measures are well above the 2.0 percent target and will keep the arguement for a turn to hikes at the central bank's table.

DailyFX