WASHINGTON (9/17/14)--The producer price index (PPI) stood pat in August, the Labor Department reported Tuesday, potentially signaling that, without upward inflation pressure, the Federal Reserve will delay movement on raising interest rates (The New York Times Sept. 16).
August's flat producer prices mark a second straight month of slowing after a strong gain in June, according to Moody's (Economy.com Sept. 16).
Declines in goods prices washed out increases in services for the month, and the overall producer price index sits just 1.8% above this time last year.
Gas prices dropped sharply, with diesel, natural gas and electricity prices all falling for the month. The final demand foods index retreated 0.5% after gaining 0.4% in July.
Falling pork, poultry and produce prices fueled the decline.
"The Fed has more time to allow monetary policy to work its way through the economy before feeling the need to raise rates," Jay Morelock, economist at FTN Financial in New York, told The New York Times.
The Federal Open Market Committee concludes its two-day meeting today where it could announce a change to the forward guidance it will use to shape forthcoming decisions about when to raise interest rates, which it has kept near zero percent since the economic downturn.
While gains have been made in the labor market, manufacturing and retail, the Fed continues to hold inflation as one of the critical markers for making its policy decisions.
"If (Fed Chair Janet) Yellen is looking for evidence of slack in the economy, and thinking that inflation is too low, then PPI final demand prices fill the bill," Chris Rupkey, chief financial economist at MUFG Union Bank, told The New York Times.