Wholesale prices rise 0.3%, but inflation not the worry now

U.S. wholesale prices rose moderately in October as food costs jumped by the largest amount in five months

The Labor Department reported Friday that its producer price index, which measures inflation pressures before they reach the consumer, increased 0.3% last month, slightly lower than the 0.4% gain in September.

Food costs rose 2.4%, the biggest increase since a 5.6% surge in May that was tied to shortages caused by the pandemic.

The uptick in wholesale prices comes in the same week that government data showed retail prices did not change in October, and consumer inflation has risen just 1.2% over the past 12 months.

The benign readings on inflation are a welcome sign at the Federal Reserve, which will feel comfortable staying put with ultra-low interest rates for a some time. Some economists believe the Fed won’t begin raising rates until 2024.

Consumers have a tendency to hold off on big purchases if they see prices falling, and that can turn into a deflationary cycle.

“The risk to inflation going forward is from another round of virus outbreaks that will suppress demand,” Rubeela Farooqi, chief U.S. economist at High Frequency Economics said in a research note.