Wholesale prices jumped in April

Both the overall number and core inflation were up more sharply than analysts had been expecting. Some cautioned that if this gain carries over to the consumer price report, which will be released Friday, it could set off warning alarms at the Federal Reserve that inflation pressures are building faster and the central bank may need to start raising interest rates more quickly.

“Underlying factors that drive inflation are all working toward creating faster price increases,” said Joel Naroff, chief economist at Naroff Economic Advisors. “While rising wholesale costs don’t necessarily translate into higher consumer prices, the jump in producer expenses is a sign inflation pressures are building.”

Inflation has been moving higher in the past year, reflecting in large part a rebound in energy and other commodity prices. The new environment is a significant change from the years immediately following the Great Recession when the main concern was deflation, a bout of falling prices that can destabilize an economy.

The Federal Reserve cut its key interest rate to a record low near zero and kept it there for seven years to boost the economy and prevent deflation from taking hold. But since December 2015, it has been cautiously raising rates, moving its key rate up three times in small quarter-point steps.

The Fed did not boost rates at its last meeting earlier this month after rate increases in December and March. But analysts believe the Fed will raise rates again at its next meeting in June and will end up increasing rates three times before this year is over. That would compare to only single increases in both 2015 and 2016.

Martin Crutsinger, The Associated Press

by Canadian Press

Wholesale prices jumped in April

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