US producer prices rose 0.4% month-over-month in August, confirming inflation concerns and increasing pressure on the Federal Reserve to continue raising interest rates, the Labor Department said Thursday.
The gain matched the forecast of economists surveyed by Reuters. On an annual basis, producer prices increased 5.4%, slightly above the 5.3% pace experts had anticipated.
Following the release, the yield on 30-year US Treasuries climbed to its highest level since 2007. Investors are weighing whether the Fed will move on rates sooner rather than later. The probability of a September rate increase was priced at roughly 65% on the day.
Fed Chair Kevin Warsh has recently voiced concern about the persistence of elevated inflation. Meanwhile, Fed Governor Christopher Waller signaled that he would consider maintaining the current rate stance if inflation shows signs of cooling further.
Producer prices serve as an early indicator of the trajectory for consumer inflation. Retail prices increased 3.4% year-over-year in July, down marginally from the 3.5% pace seen in June. For the August consumer-price report due Friday, economists expect the headline inflation rate to hold steady at 3.4%. The Fed's official target sits at 2%.
The latest producer-price reading reinforces the case that price pressures remain embedded across the supply chain, leaving policymakers with a narrower margin for error as they decide whether to keep hiking or shift course.
