US: Input costs show no signs of trend reversing, giving space for further FOMC easing – Wells Fargo

According to analysts at Wells Fargo, inflation will not prevent the Fed from easing more in the coming months, as their preferred measure of core PPI (Producer Price Index) has slowed sharply.

Key Quotes: 

“Producer prices rose 0.2% in July amid higher energy costs. Excluding food and energy, inflation is softening. Input costs show no signs of that trend reversing, giving space for the FOMC to ease policy again soon.”

“A jump in energy prices pushed U.S. producer prices up 0.2% in July. The trend in inflation, however, remains tame. Ex-food and energy, goods prices were up 0.1%, while services prices fell for the first time since January. Specifically, services ex-trade, transportation & warehousing fell 0.3%.”

“Costs of domestically produced inputs show few signs of breaking higher. With the exception of energy, intermediate processed goods fell in July, as did inputs for services. That should help keep consumer goods inflation from running away even as more imports become subject to tariffs next month.”