The main inflation report indicates that the Fed’s rate hikes may begin to cool prices

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A key measure of inflation, wholesale prices rose 8% in October from a year earlier, according to the latest report from the Bureau of Labor Statistics.

While still historically high, it was the smallest increase since July last year and significantly better than forecasts. It is the second inflation report this month to show signs of cooling in the rising prices that have plagued the economy.

Economists expected the Producer Price Index, which measures the prices paid for goods and services before they reach consumers, to show an 8.3% annual increase, down from September’s revised 8.4% .

On a monthly basis, producer prices rose by 0.2%, below expectations and even by the revised 0.2% increase in September.

On a year-over-year basis, core PPI – excluding food and energy, components whose pricing is more sensitive to market volatility – was 6.7%, down from September’s revised annual increase of 7.1%.

Month-over-month, core PPI prices remained stable, the lowest monthly value since November 2020. In September, core PPI rose a revised 0.2% from the previous month.

Economists had expected annual and monthly core PPI to be 7.2% and 0.3%, respectively, according to estimates on Refinitiv.

President Joe Biden announced the October PPI report on Tuesday, calling it “more good news for our economy this morning and more indications that we are beginning to moderate inflation.”

“Today’s news — that prices paid by businesses moderated last month — comes one week after news that prices paid by consumers are also moderate,” Biden wrote Tuesday. “And today’s report also showed that food inflation was slowing — a welcome sign for family grocery bills as we head into the holiday season.”

For much of this year, the Federal Reserve has been trying to quell decades of high inflation by tightening monetary policy, including an unprecedented four consecutive rate hikes of 75 basis points, or three-quarters of a percentage point.

The better-than-expected PPI data reflects an economy that has slowed, with supply becoming more balanced, said Jeffrey Roach, LPL Financial’s chief economist.

For example, costs related to transportation and storage fell for the fourth consecutive month, a likely result of the improved global shipping climate, he said. Manufacturer costs for new cars have fallen the most since May 2017, he added.

“Barring geopolitical or financial crises, inflation should slow into 2023,” he said in a statement.

Since PPI measures price changes further upstream, the report is considered by some to be a leading indicator of broader inflation trends and a predictor of what consumers will ultimately see at the store level.

“The PPI reading certainly adds more fuel to the fire for those who think we’re finally on a downward inflation trend,” Mike Loewengart, chief model portfolio builder at Morgan Stanley, said in a statement.

Last week’s consumer price index showed inflation slowing to 7.7% from an annualized 8.2% for consumer goods, surprising investors and giving Wall Street its biggest boost since 2020.

The CPI data was “reassuring,” Fed Vice Chairman Lael Brainard said Monday. of its future rate hikes.

“If you look at the inflation numbers, there are indications that we have peaked, but are we going down quickly?” Steven Ricchiuto, chief economist for Mizuho Americas, told CNN Business.

Ricchiuto noted that October’s numbers are just a few notches below September’s.

“These are not the kinds of things that tell the Fed to stop tightening rates,” he said. However, “they can tell you [that] you don’t need 75 basis points.”

CNN’s DJ Judd and Matt Egan contributed to this report.

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