US producer prices increase more than expected in April

WASHINGTON (Reuters) – U.S. producer prices rose more than expected in April amid strong gains in the costs of services and goods, suggesting inflation remained high early in the second quarter.

The Labor Department's Bureau of Labor Statistics said Tuesday that the producer price index for final demand rose 0.5% last month after falling a downwardly revised 0.1% in March.

Economists polled by Reuters had expected the producer price index to rise by 0.3% after rising by 0.2% last March. In the 12 months to April, the producer price index rose 2.2% after rising 1.8% in March.

Inflation rose in the first quarter amid strong domestic demand after slowing for most of last year. Economists are optimistic that prices will resume their downward trend this quarter as the labor market slows.

Financial markets expect the Federal Reserve to begin its easing cycle in September, although some economists believe the first rate cut could occur in July.

The US central bank early this month left its benchmark overnight interest rate unchanged in the current range of 5.25% to 5.50%, a level it has remained at since July. The Fed has raised interest rates by 525 basis points since March 2022.

Wednesday's consumer price data could provide new clues about the timing of a long-awaited interest rate cut.

(Reporting by Lucia Mutikani; Editing by Andrea Ricci)

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