Business & Economy

Business & Economy

The Big Story

Inflation spike backs Fed into corner on key decision

Wholesale prices increased in July at the quickest pace since February, putting the Federal Reserve in a tough position as it faces pressure to keep prices low and employment high.

© The Associated Press

The 3.3 percent yearly increase — which blew past economists’ expectations — comes as economists are keeping a sharp eye on inflation data amid President Trump’s trade war.

The Labor Department’s producer price index (PPI), which measures prices that businesses charge one another before determining the final sales price they charge to consumers, advanced by 0.9 percent from June to July, marking a 3.3 percent increase on the year, the Labor Department reported Thursday.

That’s the sharpest increase in five months, more than quadrupling economists’ expectations for a 0.2 percent increase on the month. Removing the more volatile categories of energy and food, the “core” PPI advanced by 0.6 percent on the month, the fastest pace since 2022.

The surprisingly weak July jobs report also showed employment conditions are worsening, but upward-moving prices mean the Fed will have to negotiate stagflationary concerns in the short term.

Trump has been demanding rate cuts to spur the economy since the beginning of the year.

Cutting interest rates could help support the job market by easing borrowing costs for businesses. But doing so could also add fuel to inflation.

The Hill’s Tobias Burns has more here.

Welcome to The Hill’s Business & Economy newsletter, I'm Aris Folley — covering the intersection of Wall Street and Pennsylvania Avenue.

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