The level of wholesale inflation in America dropped unexpectedly in March, which provided evidence that the inflationary pressure in the United States started to ease.
Producer Price Index (PPI) showed a 0.5% month-over-month decline while going up 2.7% year-over-year, as evidenced by the Labor Department data.
The figures turned out to be better than the growth projections by 3% year-over-year and by 0% month-over-month. This is a favorable sign for the U.S. Federal Reserve confirming that the aggressive interest rate hike policy is starting to pay off.
The report presenting U.S. PPI was released the next day after the CPI figures (Consumer Inflation). Their increase in March came in below expectations totaling 0.1% month-over-month and 5% year-over-year.
That being said, a number of indicators show that inflation is still well above the Fed's preferred 2% target. This is an alarming sign as the central bank has already hiked rates nine times back to back.
A strong decline in the CPI MoM is in many ways associated with a 6.4% drop in energy prices, including an 11.7% drop in the cost of gasoline.
Interim inflation reports will have serious implications for the Fed, which is tightening interest rates at the fastest pace observed in decades.
Despite the recent upheavals in the banking sector, markets still expect the U.S. central bank to hike interest rates during its next two-day meeting on May 2-3. At the same time, 64.5% of traders anticipate the 25-basis-point hike.
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