U.S. factory-gate inflation figures for last month came in modestly higher than forecast, complicating the Federal Reserve's effort to tame price pressures in a red-hot U.S. economy.
The Bureau of Labor Statistics on Friday said its headline producer-price index for July rose 0.8% from last year, and 0.3% on the month, with both tallies coming in ahead of economists' forecasts.
The closely tracked core reading, which strips out volatile food and energy prices, was also modestly hotter, rising 2.4% and 0.3% on a monthly and annualized basis respectively.
The data followed yesterday's softer-than-expected reading from the bureau, which showed core consumer prices rising 4.7% and headline inflation quickening to 3.2% over the month of July.
"The increase in wholesale prices serves as a reminder that the data-dependent Fed isn't ready to declare victory on its campaign to quell inflation," said Quincy Krosby, chief global strategist for LPL Financial in Charlotte.
"Although higher fees in portfolio management services were considerably higher, it reflects a collection of other service fees, including higher insurance costs," she added. "With financial market performance strong, it's not surprising that asset managers are raising their prices as clients have generally seen their holdings improve."
Fed Is Unconvinced Inflation Fully Abated
Both sets of figures, however, indicate that while progress has been made in bringing inflation down from its 40-year peak of 9.1% in the summer of last year, the Fed remains unconvinced the price pressures have fully abated.
The Atlanta Fed's GDPNow tool, a real time indicator of U.S. growth, suggests the economy is growing at a 4.1% clip, up from its 3.9% estimate earlier in the month. Weekly jobless claims data, meanwhile, suggest the labor market remains historically tight, adding to concern that wage pressures will reaccelerate into the final months of the year.
"Whether we raise another time, or hold rates steady for a longer period - those things are yet to be determined," San Francisco Fed President Mary Daly told Yahoo Finance. "It would be premature to project what I think would happen because there's a lot of inform."
U.S. stocks were trending lower following the data release with the S&P 500 down 20 points in the opening hour of trading and the Dow Jones Industrial Average falling 65 points. The tech-focused Nasdaq was down 103 points amid a rise in Treasury yields.
Benchmark 10-year Treasury note yields were marked 5 basis points higher at 4.151% while 2-year notes were pegged at 4.905%, around 8 basis points lower from prior to the data release.
The U.S. dollar index, which tracks the greenback against a basket of its global peers, was marked 0.23% higher at 102.754
The Fed lifted its benchmark lending rate to between 5.25% and 5.5% in July, the 12th hike in 16 months, and warned that stubborn inflation pressures would likely require more increases between now and the end of the year.
CME Group's FedWatch is now pricing in only a 9.5% chance that the Fed will lift the benchmark federal-funds rate by a quarter-point, to between 5.5% and 5.75%, when it meets next month in Washington. The odds of a hike in November were trimmed to around 27.9%.
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