Is inflation on the rise?
*Financial Times, by James Politi, August 19, 2008:
"US wholesale prices see sharp spike
US wholesale prices rose twice as fast as expected last month as new home construction plunged, government data showed on Tuesday, offering little reason for optimism on the outlook for either inflation or the ailing housing market.
The producer price index, which was forecast to jump by 0.6 per cent in July, instead gained 1.2 per cent, disappointing economists looking for signs of a quick easing in inflationary pressures. The data echoed the release of the consumer price index last week, which also increased twice as much as expected – by 0.8 per cent.
At the core level, which excludes volatile food and energy costs, the jump in wholesale prices was even more surprising. The index increased by 0.7 per cent, more than three times as much as the 0.2 per cent gain predicted by economists.
At an annual level, the headline PPI was up 9.8 per cent, the highest since 1981, while core PPI was up 3.5 per cent, the most since 1991.
The Federal Reserve is expected to keep interest rates on hold at 2 per cent through the end of the year at least, but may be forced into raising rates if high inflation persists."
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