U.S. producer price. fell more than expected in May and the annual increase in producer inflation was the smallest in nearly 2-1/2 years, strengthening the case for the Federal Reserve to temporarily halt interest rate hikes on Thursday.
The producer price index for final demand fell 0.3% last month on lower energy costs after rising an unrevised 0.2% in April, the Labor Department reported on Wednesday.
In the 12 months to May, the HIPR increased by 1.1%. That was the smallest year-on-year increase since December 2020 and followed a 2.3% rise in April. The annual HIPR rate is moderated because last year's jump is reduced from the calculation.
Economists polled by Reuters had forecast PPI falling 0.1% from the previous month and rising 1.5% year-on-year.
The report followed data on Tuesday that showed consumer prices rose slowly in May. The year-on-year increase in the consumer price index was the smallest since March 2021.
Fed officials are expected to keep rates unchanged at the end of their two-day meeting, for the first time since March 2022 when the U.S. central bank embarked on the fastest monetary policy tightening campaign in over 40 years.
The Fed, which has raised its policy rate by 500 basis points in this tightening cycle, is seen as opening the door to further rate hikes given the resilience of the economy, particularly the labor market.
