A key inflation gauge showed price hikes slowed last month. But economic jitters remain

US wholesale inflation slowed as expected in July, easing after an unexpected flare-up the month before. The Producer Price Index (PPI) was 2.2% for the 12 months ended in July, a pullback from the 2.7% increase registered in June. On a monthly basis, prices rose 0.1%, slower than the 0.2% increase in June. Economists had expected a 0.2% monthly increase and a slowdown to 2.3% annually. The Dow jumped 409 points, or 1%, on Tuesday as investors cheered the slowdown in price hikes. The PPI serves as a potential bellwether for retail-level inflation, with the Consumer Price Index (CPI) for July being closely watched. The modest monthly increase in the overall PPI was attributed to a 0.6% jump in goods prices, while services prices fell 0.2%. When stripping out energy and food prices, core PPI prices were flat for the month. Wednesday’s CPI reading is expected to show a more gradual decrease in inflation. The CPI for July is expected to rise 0.2% from June and hold steady at 3% annually, with core CPI expected to rise 0.2% as well but slow on an annual basis to 3.2%. The biggest piece to watch will be shelter inflation, as it has slowed in recent months. Given inflation’s trajectory and a gradual slowdown in the economy, some economists project rate cuts from the Federal Reserve to close out the year and in 2025. A hotter-than-anticipated lift in the CPI could unnerve investors and prompt fears of stagflation, but experts argue these fears are unfounded. Inflation expectations have cooled since hitting a 40-year high in June 2022, as indicated by survey data from the Federal Reserve Bank of New York. An acceleration in inflation is unlikely to change the Fed’s plan to loosen monetary policy and cut its benchmark lending rate.