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Kai Ryssdal: There are days in the business news cycle when you just have to stop and take a reading. Figure out what the economic indicators are saying and what they mean in the grand scheme of things.
Today’s exhibit A is a little number we like to call the producer price index, also known as wholesale inflation. Last month, the core PPI rose the most it has in more than two years. There’ve been rumblings out there about how inflation’s starting to spread and how that could force the Federal Reserve to pull back on its easy money policies.
But there were some other numbers out today that our senior business correspondent Bob Moon tells us might provide some breathing room.
Bob Moon: Today’s wholesale inflation rise raised some eyebrows. That’s because worry that easy money could lead to runaway prices has become a hotly-debated issue. Just last week, the chairman of the House Budget Committee, Wisconsin Republican Paul Ryan, was lecturing Ben Bernanke to beware of his policy’s potential effects.
Paul Ryan: The inflation dynamic can be quick to materialize and painful to eradicate once it takes hold.
The Fed chief has insisted prices are far from out of control. Last month’s rise in the core inflation rate was just half a percent. But some economists see it as a harbinger of higher consumer prices.
At Naroff Economic Advisors, Joel Naroff says policymakers will have to rethink whether they need to raise interest rates sooner than anticipated.
Joel Naroff: The markets and most forecasters have expected the Fed to do nothing this year, and these kinds of numbers tell me that the Fed’s going to have to do something before the end of the year.
Other readings out today reflect stubborn slack in the economy that could support maintaining the Fed’s low-interest course. Except for new apartments, fresh housing construction remains sluggish, and factory output dipped unexpectedly last month. Bernanke made it clear last week those kinds of numbers remain his focus.
Ben Bernanke: I don’t think anybody can argue that our economy’s overheated, that it’s growing too quickly, that it’s short of resources.
Never mind reports that businesses are aiming to raise prices in the coming months. MFR Financial economist Joshua Shapiro doubts that will stick.
Joshua Shapiro: There’s a big difference between what a company hopes for and wishes for, and what they actually end up getting consumers to pay. I don’t think consumers are in any position or mood to start paying considerably higher prices.
Minutes from the last Fed meeting released today see consumer prices rising at the most to 1.7 percent this year — still below the target. We get January’s consumer inflation numbers tomorrow.
I’m Bob Moon for Marketplace.
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