Inflation Is Still Running Hot As US Producer Prices Rise: What You Need To Know

U.S. producer prices jumped more than economists had expected last month despite the Federal Reserve's aggressive response to runaway inflation. 

What Happened: 

• The producer price index (PPI) increased 0.4% in September, the U.S. Bureau of Labor Statistics
• The number came in above average economist estimates for an increase of 0.2%.
• On an unadjusted 12-month basis, PPI increased 8.5%, which was slightly lower than the 8.7% number in August.
• Excluding food, energy and trade services, the PPI index jumped 0.4% in September and was up 5.6% year-over-year. 

Why It Matters: The SPDR S&P 500 SPY was volatile following the release premarket Wednesday as inflation concerns continue to be problematic for the broader markets. 

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Wednesday's PPI release comes just one day ahead of consumer price index data. PPI measures prices at the wholesale level while CPI measures the prices that consumers pay.

The Federal Reserve will be paying close attention as it attempts to tame the highest inflation in more than 40 years. If inflation remains elevated, the Fed is more likely to continue in its aggressive response with more rate hikes.

Last month, the Fed raised its benchmark rate by 0.75% for the third straight time, bringing the target fed funds rate up to a new range between 3% and 3.25%, the highest levels seen since before the 2008 financial crisis.

Reactions To The Print: Liz Young, head of investment strategy at SoFi Technologies Inc SOFI, said the PPI data was "not great news" in the fight against inflation. 

Mike Loewengart, head of model portfolio construction at Morgan Stanley Global Investment Office, wasn't surprised by Wednesday's PPI data, per CNBC.

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"Prices remain elevated so it shouldn’t be a surprise to see producer goods and services rise. Keep in mind the increase is still below what we were seeing consistently month after month earlier this year," Loewengart said.

"No doubt the Fed still has its work cut out for them, and if tomorrow’s CPI read is hot, don’t be surprised to see some investors come to grips with how long the road to tamer inflation may be."

The US Bureau of Labor Statistics will release the CPI data for August on Thursday. CPI is expected to rise by 0.2% on a monthly basis. The headline number is expected to come in up 8.1% year-over-year.

SPY Price Action: The SPY was up 0.27% at $358.68 Wednesday morning, according to Benzinga Pro.

Photo: Mircea Ploscar from Pixabay.