The recent pickup in inflation has led some economists to postpone their projections for when the Federal Reserve will begin cutting interest rates.
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The economy keeps growing, defying widespread fears from a year ago that 2023 would bring a recession, a consequence of the much higher borrowing rates the Fed engineered.
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Excluding gas prices, retail sales were up 0.6%, helped in part by government tax refunds and warm weather.
The big question for consumers and the economy is whether the surge in oil and gas prices will create a sustained, broader inflation shock.
Thursday’s report is largely a warm-up for the more important inflation data to be released Friday, when the government will publish the higher-profile consumer price index for March.
Federal Reserve Chair Jerome Powell suggested that the central bank remained concerned about inflation that was still stubbornly elevated even before the Iran conflict’s impact on gas prices.
U.S. wholesale prices came in hotter than expected in February, driven partly by a sharp increase in food costs.
Even if oil price increases are short-lived, it will almost certainly delay any interest-rate cut by the Federal Reserve, which meets next week.
Driving the increase was an uptick in the wholesale price of services, led by higher profit margins for retailers and wholesalers.
Signs that inflation is cooling could make it more likely that the Federal Reserve will reduce its key interest rate later this year, which could translate into lower borrowing costs for mortgages, auto loans and credit cards.
The minutes showed that even some Fed officials who supported the rate cut did so with reservations, with some saying they wanted to wait for more data before making any further moves.
But economists caution that persistent and potentially worsening inflation could make a January interest rate cut from the Fed less likely.
The report lands at a moment of growing uncertainty about the broader economic outlook, with job growth slowing sharply in recent months.
Core inflation was muted in September and will bolster the case for a cut to the Federal Reserve’s key interest rate at its next meeting.
Trump has built his second term in part around imposing steep levies on goods imported into the U.S. in hopes of encouraging domestic production and lifting the U.S. economy.
The data for Friday’s report was gathered before Oct. 1, but price data for October isn’t being gathered due to the government shutdown, and the Trump administration suggested Friday that an inflation report won’t be released next month.
The minutes provide insight into how the Fed’s policymakers were thinking last month about inflation, interest rates, and hiring.
The increases in the Commerce Department’s personal consumption expenditures, or PCE, price index were what forecasters had expected.
At this week’s Federal Reserve meeting, the decision it will make on interest rates—usually the main event—is just one of the key unknowns to be resolved when officials gather Tuesday and Wednesday.
The reading is the last the Federal Reserve will receive before its two-day meeting that begins Tuesday, where policymakers are widely expected to cut their short-term rate.
The drop in producer prices makes it even more likely that the Federal Reserve will cut its benchmark interest rate next week for the first time this year.
Fast food visits by lower-income consumers dropped by double-digit percentages industrywide in the second quarter, McDonald’s said.
