Wholesale prices increased at a quicker-than-expected rate in April, sparking further fears that the inflation that has affected American consumers for the last three years may be here to remain longer. The news came amid further concerns that the increased inflation could further harm Americans’ pocketbooks, spark interest rate hikes or both, which would each increase the chance of a recession.
The producer price index increased by 0.5% last month, compared to the wider 0.3% estimate. This included a 0.5% jump in the cost of ‘core’ items, which excludes food and energy prices.
Wholesale inflation also increased on a year-over-year basis by 2.2%. This rate represented the highest such increase in more than a year.
In addition, ‘core’ wholesale inflation increased by 2.4% year-over-year. This represents the sharpest increase in eight months.
The increase in inflation could also become a significant factor in November’s election. A number of polls have shown that more Americans trust former President Donald Trump on the issue than President Joe Biden.
The latest inflation data is a reminder: Bidenomics has been a disaster.
— Tom Cotton (@TomCottonAR) May 14, 2024
The higher inflation rate also appears to undermine the wider argument from the president that his ‘Bidenomics’ plan is working. Americans have generally rated the economy as poor, with one of the major factors being the rising cost of living.
Despite the passage of the ‘Inflation Reduction Act’ in 2022, the rate of inflation has remained above the 2% target set by the Federal Reserve.
The increased inflation rate could call for an increase in interest rates to try and tamp it down. Federal Reserve Chairman Jerome Powell said this week that the higher rates would mean that today’s higher rates will likely continue.
He also said that inflation has remained higher than expected for longer than expected.
“We did not expect this to be a smooth road. But these [inflation readings] were higher than I think anybody expected,” he said. “What that has told us is that we’ll need to be patient and let restrictive policy do its work.”
