After the Consumer Price Index (CPI) last week showed inflation easing, today the Labor Department released its Producer Price Index (PPI) for October, showing that wholesale prices rose less than expected. PPI rose 0.2% last month, less than the 0.4% economists anticipated. The index was 8% higher since last year, down from 8.4% the month before. The better-than-expected inflation data gave investors something to cheer about—stocks are jumping today on the news. The more inflation cools, the less likely it becomes that the Federal Reserve will aggressively hike rates at its policy meeting next month. Markets believe there is an 85% chance that the central bank will only increase rates by 50 basis points (bp), lower than the 75-bp hikes we’ve seen over the past few months. Lower wholesale inflation isn’t just good for markets—it’s good for us, too. Many stores will pass on higher costs to shoppers, so if wholesale inflation declines, it could mean lower prices for us. And if rate hikes aren’t as aggressive, then loans and debt won’t be as expensive either, so this could be good news for anyone interested in buying a house or those holding credit card debt.
