Inflation, as measured by the producer price index, fell half a percentage point to 2.7% for the year ending in March, the Bureau of Labor Statistics reported Friday, adding to the recent encouraging indications that price pressures are abating.
On a month-to-month basis, the wholesale price index unexpectedly fell by four-tenths of a percentage point.
Core PPI inflation, which strips out volatile food and energy prices, also fell two-tenths of a percentage point to 3.3% for the year.
The report comes a day after the more closely watched consumer price index dropped from 2.8% to 2.4% for the year ending in March, a sign that price pressures might not be among the top economic risks facing the new Trump administration.
Still, investors are increasingly concerned that President Donald Trump’s sweeping tariff agenda might affect prices. It is also unclear to what degree they will complicate the Federal Reserve’s mission to drive down inflation while keeping the economy and labor market afloat.
Stocks cratered after Trump announced 10% tariffs on most countries and much higher levies on others. They then posted record one-day gains on Wednesday when he announced a rollback of some tariffs. But on Thursday, the stock market tanked again after the Trump administration clarified the tariffs on Mexico and Canada are still in place and that the effective tariff rate for China is now 145% and not 125%. There are also fears that the tariffs will result in economically damaging trade wars with some of the countries, especially China.
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The Fed cut rates by a whole percentage point last year. As inflation proved difficult to subdue, though, the central bank opted to hold interest rates steady at its January and March meetings. The Fed’s goal is 2% annual inflation.
Fed Chairman Jerome Powell also said that the tariffs were bigger than the central bank anticipated. Trump has pushed Powell to cut interest rates but has resisted those calls and said the Fed is waiting for “greater clarity” before adjusting its policy stance.
