Wholesale prices in the United States accelerated again in February, the latest sign that inflationary pressures in the economy remain high and may not cool as quickly in the coming months as the Federal Reserve or the Biden administration would like.

The Labor Department said Thursday that the producer price index – which tracks inflation before it reaches consumers – rose 0.6% from January to February, compared with a 0.3% increase the month before.

On an annual basis, producer prices rose by 1.6% in February, the highest level since September last year.

The data could pose a challenge for the Fed, which meets next week and is counting on a cooling of inflation as it considers when to cut its key interest rate, now at a 23-year high.

The Fed raised rates eleven times in 2022 and 2023 to combat high inflation.

A Fed rate cut could boost the economy and financial markets, as it would likely lower borrowing costs for mortgages, auto loans and business loans over time.

The producer price index – which tracks inflation before it reaches consumers – rose 0.6% from January to February, compared with a 0.3% increase the month before. REUTERS

Higher wholesale gas prices, which rose 6.8% between January and February, accounted for much of last month’s increase. Wholesale food costs also saw a big increase, up 1%.

But even excluding volatile food and energy categories, “core” inflation was still higher than expected in February. Core wholesale prices rose 0.3%, compared with a 0.5% increase the month before.

Compared to a year ago, core prices rose 2%, the same as the month before.

Core inflation, which usually provides a better sign of where inflation may be heading, is being watched particularly closely.

Persistently high inflation could become a threat to President Biden’s re-election bid, which has been hampered by Americans’ generally gloomy view of the economy.

Consumer inflation has plummeted from a peak of 9.1% in 2022 to 3.2%.

Still, many Americans are annoyed that average prices are still about 20% higher than before the pandemic hit four years ago.

The producer price index can provide an early indication of the direction in which consumer inflation will evolve.

It is also closely watched because some of its data is used to construct the Fed’s preferred inflation gauge, known as the personal consumption expenditure price index.

Thursday’s producer price index report suggested core prices on the Fed’s gauge rose 0.3% last month, according to economists at Capital Economics, and rose 2.8% from a year ago.

The year-over-year measure, if accurate, would remain unchanged from the previous month.

A separate report on Thursday showed retail sales grew 0.6% between January and February, after a sharp decline of 1.1% the month before.

The data could pose a challenge for the Fed, which meets next week and is counting on a cooling of inflation as it considers when to cut its key interest rate, now at a 23-year high. Above, Fed Chairman Jerome Powell. Getty Images

The data suggests consumer demand is cooling, with many consumers using up their pandemic-era savings and spending more on credit cards.

A more cautious consumer could offer the Fed some reassurance that the economy is cooling, a trend that could lower inflation over time.

Thursday’s data follows a report earlier this week on the government’s most closely watched inflation measure, the consumer price index.

The CPI rose a sharp 0.4% from January to February, a faster pace than consistent with the Fed’s 2% inflation target.

Compared to a year earlier, prices rose 3.2%, compared to a 3.1% increase the month before.

The CPI report, which marked the second straight increase in consumer prices, illustrated why Fed officials have signaled a cautious approach to implementing rate cuts.

After a meeting in January, officials said in a statement that they needed “more confidence” that inflation was falling steadily toward the 2% target level.

Since then, several Fed policymakers have said they believe inflation will continue to decline.

Inflation was expected to move higher in January and February, partly because companies typically impose price increases at the beginning of the year.

Although the government’s seasonal adjustment process should account for such regular annual patterns, it does not always do so perfectly.

Still, the acceleration in producer prices in February suggested that inflation could remain high into the spring.

Inflation was expected to move higher in January and February, partly because companies typically impose price increases at the beginning of the year. AP

Economists and Wall Street traders expect the Fed to cut its policy rate in June, but that could happen later this year.

In December, policymakers indicated they would cut their rates three times this year.

On Wednesday, officials will release new quarterly forecasts that could maintain or revise this forecast.

Last week, Fed Chairman Jerome Powell told Congress that the central bank was “not far” away from cutting interest rates.

Solid spending and hiring so far this year show that the economy has remained healthy despite the Fed’s aggressive series of rate hikes.

Last month, employers added as many as 275,000 jobs, the government reported.

And while unemployment has risen by two-tenths to a still low 3.9%, it has remained below 4% for more than two years – the longest stretch since the 1960s.

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