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The
Labor Department reported Wednesday that its producer price
index — which captures inflation before it reaches consumers —
dropped 0.3% from May, biggest decline since April 2025 and a
reversal from a 0.6% uptick the month before. Compared to a year
earlier, wholesale prices were up 5.5% in June, decelerating
from a 6% increase the month before. Gasoline prices plunged 12%
in June but are still up nearly 43% from June 2025, pushed
higher by the Iran war. Food prices also dipped in June.
Excluding volatile food and energy prices, so-called core
wholesale prices were up 4.7% from June 2025 and 0.2% from May.
The producer price report came out a day after the Labor
Department said consumer prices dropped 0.4% from May to June,
the biggest monthly drop in four years. Compared to a year
earlier, they were up 3.5% last month, down from 4.2% in May.
The June inflation numbers were much cooler than forecasters had
expected, reducing pressure on the Federal Reserve to raise
interest rates this year. Still, inflation is running above the
Fed's 2% target.
In his first appearance before Congress since becoming Fed chair
May 22, Kevin Warsh said Tuesday that the central bank has "no
tolerance for persistently elevated inflation.''
Energy prices have ratcheted higher since President Donald Trump
on Monday announced a new blockade in the Strait of Hormuz,
through which a fifth of the world's oil and natural gas passes.
Many Americans are already frustrated with the high cost of
living, dimming the prospects of Trump's Republican Party in
November's midterm elections.
“There’s no near-term pressure on the Fed, but oil is in the
driver’s seat over the longer term,” said David Russell, global
head of market strategy at the online brokerage TradeStation.
"Energy saved the day in June, but that might become ancient
history if the Strait of Hormuz doesn’t open soon.''
Wholesale prices can offer an early look at where consumer
inflation might be headed. Economists also watch it because some
of its components, notably healthcare and financial services,
flow into the Fed’s preferred inflation gauge — the personal
consumption expenditures, or PCE, index.
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