A measure of wholesale prices increased less than expected in March, providing some potential relief from worries that inflation will hold higher for longer than many economists had expected.

The producer price index rose 0.2% for the month, less than the 0.3% estimate from the Dow Jones consensus and not as much as the 0.6% increase in February, according to a release Thursday from the Labor Department’s Bureau of Labor Statistics.

However, on a 12-month basis, the PPI climbed 2.1%, the biggest gain since April 2023, indicating pipeline pressures that could keep inflation elevated.

Excluding food and energy, the core PPI also rose 0.2%, meeting expectations. Excluding trade services from the core level, the increase was 0.2% monthly but 2.8% from a year ago.

The release comes a day after the BLS reported that consumer prices again rose more than expected in March, raising concerns that the Federal Reserve will be unable to lower interest rates anytime soon.

On the producer price side, March’s gain was pushed by services, which saw a 0.3% increase on the month. Within that category, the index for securities brokerage and other investment-related fees jumped 3.1%.

Conversely, goods prices decreased 0.1%, flipping a 1.2% increase in February. Final demand costs for energy, which have been on the rise lately, actually fell 1.6% on the month. However, wholesale prices for final demand food and goods less food and energy climbed 0.8% and 0.1%, respectively.

Though prices have been rising at the pump, the final demand index for gasoline fell 3.6%. That contrasted with the consumer price index, which showed gasoline up 1.7% on the month.

Markets showed little reaction to the data, with futures tied to major stock indexes slightly higher though Treasury yields declined.

In other economic news Thursday, initial filings for jobless benefits fell to 211,000, a decline of 11,000 from the previous week’s upwardly revised level and below the 217,000 estimate from Dow Jones.

Continuing claims, which run a week behind, increased to 1.82 million, up 28,000 for the period, according to the Labor Department release.

The economic data points are being watched closely as the Federal Reserve contemplates its next moves on monetary policy.

Wednesday’s CPI release jolted markets, which had been anticipating an aggressive series of interest rate cuts this year. The report showed annual inflation running at 3.5%, well above the Fed’s 2% target.

The market now is pricing in the possibility of just two cuts this year, likely not starting until September, according to CME Group data.

Wholesale prices accelerated at a faster than expected pace in February, another reminder that inflation remains a troublesome issue for the U.S. economy.

The producer price index, which measures pipeline costs for raw, intermediate and finished goods, jumped 0.6% on the month, the Labor Department’s Bureau of Labor Statistics reported Thursday. That was higher than the 0.3% forecast from Dow Jones and comes after a 0.3% increase in January.

Excluding food and energy, core PPI accelerated by 0.3%, compared to the estimate for a 0.2% increase. Another measure that also excludes trade services increased 0.4%, compared to the 0.6% gain in January.

On a year-over-year basis, the headline index increased 1.6%, the biggest move since September 2023.

A busy morning for economic data also showed that retail sales rebounded, up 0.6% on the month according to Commerce Department data that is adjusted seasonally but not for inflation. The increase helped reverse a downwardly revised 1.1% slump in January but was still below the estimate for a 0.8% increase.

Also, initial filings for unemployment insurance nudged lower to 209,000 last week, a decrease of 1,000 and below the estimate for 218,000, the Labor Department reported.

The market focused on the PPI release, which comes two days after the consumer price index, which measures what consumers pay in the marketplace, showed that inflation was slightly higher than anticipated on a year-over-year basis.

PPI is considered a leading indicator for inflation as it indicates costs early in the supply chain.

The BLS reported that about two-thirds of the rise in headline PPI came from a 1.2% surge in goods prices, the biggest increase since August 2023. As with CPI, the acceleration was traced to energy prices, with saw a 4.4% increase in the final demand measure. Gasoline prices jumped 6.8% at the wholesale level.

Services costs increased 0.3%, boosted by a 3.8% surge in traveler accommodation services.

On the retail sales side, the data indicated that consumers kept ahead of CPI inflation, which increased 0.4% on the month, though sales were still sluggish.

Excluding auto, retail sales rose 0.3%, one-tenth of a percentage point below expectations. Motor vehicle parts and dealers saw an increase of 1.6%, second only to the 2.2% gain for building material and garden centers on the month.

Despite slumping prices, gasoline stations reported an increase of 0.9%. Electronics and appliance sales rose 1.5% while miscellaneous store sales increased 0.6% and restaurants and bars were up 0.4%.

Retail sales posted a 1.5% gain on a year-over-year basis, below the 3.2% increase in the CPI.

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Inflation rose again in February, keeping the Federal Reserve on course to wait at least until the summer before starting to lower interest rates.

The consumer price index, a broad measure of goods and services costs, increased 0.4% for the month and 3.2% from a year ago, the Labor Department’s Bureau of Labor Statistics reported Tuesday. The monthly gain was in line with expectations, but the annual rate was slightly ahead of the 3.1% forecast from the Dow Jones consensus.

Excluding volatile food and energy prices, the core CPI rose 0.4% on the month and was up 3.8% on the year. Both were one-tenth of a percentage point higher than forecast.

While the 12-month pace is off the inflation peak in mid-2022, it remains well above the Fed’s 2% goal as the central bank approaches its two-day policy meeting in a week.

A 2.3% increase in energy costs helped boost the headline inflation number. Food costs were flat on the month, while shelter rose another 0.4%.

The BLS reported that the increases in energy and shelter amounted to more than 60% of the total gain. Gasoline jumped 3.8% on the month while owners’ equivalent rent, a hypothetical gauge of what homeowners could get renting their properties, rose 0.4%.

“Inflation continues to churn above 3%, and once again shelter costs were the main villain. With home prices expected to rise this year and rents falling only slowly, the long-awaited fall in shelter prices isn’t coming to the rescue any time soon,” said Robert Frick, corporate economist at Navy Federal Credit Union. “Reports like January’s and February’s aren’t going to prompt the Fed to lower rates quickly.”

Airline fares posted a 3.6% increase, apparel prices rose 0.6% and used vehicles were up 0.5%. Medical care services, which helped feed a higher-than-expected CPI increase in January, decreased 0.1% last month.

The year-over-year increase for headline CPI was 0.1 percentage point higher than January, while core was one-tenth of a point lower.

Markets showed little initial reaction after the news broke, with futures tied to major stock averages as well as Treasury yields slightly higher.

While the 12-month pace is off the inflation peak in mid-2022, it remains well above the Fed’s 2% goal as the central bank approaches its two-day policy meeting in a week.

Fed officials in recent weeks both have signaled that rate cuts are likely at some point this year and expressed caution about letting up too soon in the battle against high prices. The statement after the January meeting indicated that policymakers need “greater confidence” that inflation is moving back to target.

Chair Jerome Powell, in congressional testimony last week, echoed those concerns, though he did mention that the Fed is probably “not far” from the point where it can start easing up on monetary policy.

Tuesday’s report “leaves Fed officials some way from attaining the ‘greater confidence’ needed to begin cutting interest rates,” said Paul Ashworth, chief North America economist at Capital Economics.

For financial markets, the shift in the Fed stance from its apparent policy pivot in late 2023 has meant a repricing on the pace of rate cuts. Where futures traders entered the year expecting cuts to start coming in March, with six or seven total on the year, they have pushed out the first reduction to June, with three to follow, assuming cuts in quarter percentage point increments.

A bustling economy has helped the Fed focus on incoming data and allowed policymakers to avoid having to rush to lower rates. Gross domestic product expanded at a 2.5% annualized pace in 2023 and is on pace to increase at a 2.5% pace in the first quarter of 2024, according to the Atlanta Fed’s GDPNow tracker.

One key ingredient in that growth has been a resilient consumer boosted by a strong labor market. The economy added another 275,000 nonfarm jobs in February, though the increase skewed heavily to part-time jobs and the unemployment rate rose to 3.9%.

Such strength can be a double-edged sword: While the growth in the face of aggressive rate hikes has bought the Fed time on policy, it also raises concerns that inflation could be more durable than expected.

Housing costs in particular have caused concern.

Shelter comprises about one-third of the CPI weighting and has been slow to decelerate, at least according to the BLS measure. Fed officials see rental prices coming down through the year, and other measures outside the CPI computation of owners-equivalent rent have shown easing price pressures.

Correction: The BLS reported that the increases in energy and shelter amounted to more than 60% of the total gain. An earlier version misstated a sector.

In January, Turkish inflation logged its biggest monthly jump since August with a 6.7% rise from December, while year-on-year inflation hit nearly 65%, according to the Turkish central bank’s figures released Monday.

The consumer price index for the country of 85 million people increased by 64.86% annually, up slightly from 64.77% in December. Sectors with the largest monthly price rises were health at 17.7%, hotels, cafes and restaurants at 12%, and miscellaneous goods and services at just more than 10%. Clothing and footwear was the only sector showing a monthly price decrease, with -1.61%.

Food, beverages and tobacco, as well as transportation, all increased between roughly 5% and 7% month on month, while housing was up 7.4% since December.

The monthly rises, economists say, stem from a significant increase to the minimum wage that Turkey’s government mandated for 2024. The minimum wage for the year has risen to 17,002 Turkish lira ($556.50) per month, a 100% hike from January 2023.

Turkey’s central bank has been on a prolonged mission to bring down inflation, implementing eight consecutive interest rate hikes since May 2023, for a cumulative 3,650 basis points. The bank’s latest increase, on Jan. 25, raised the key interest rate by 250 basis points to 45%.

The more conventional approach follows several years of unorthodox policy during which Ankara refused to tighten rates despite ballooning inflation. The lira is down 38% against the dollar year to date and has lost more than 80% of its value against the greenback over the last five years. 

The latest inflation print comes just days after Turkey’s central bank governor, Hafize Gaye Erkan, announced her resignation, saying Friday that the decision was due to a “reputation assassination” campaign and the need to protect her family.

Erkan became the bank’s central governor by presidential decree in June 2023, and led — along with Turkish Finance Minister Mehmet Simek — the turnaround in Turkey’s monetary policy and subsequent series of interest rate rises.

She was replaced on Saturday by the central bank’s deputy governor, Fatih Karahan, who spent nearly a decade as an economist at the Federal Reserve Bank of New York.

January’s inflation figures “highlight the continued strength of services inflation and may put pressure on new central bank governor Karaham to restart the central bank’s tightening cycle,” Liam Peach, senior emerging markets economist at London-based Capital Economics, wrote in a research note.

“The fact that inflation didn’t rise significantly more than expected in January is positive given the uncertainty about the impact of the minimum wage hike,” Peach wrote. “But the figures present a small setback to the disinflation process and highlight the continued strength of services inflation. For now, the central bank’s end-year inflation forecast of 36% remains intact.”  

The global economy does not need a “collapse” in order to bring inflation back to target and return to sustainable growth, according to Steven Wieting, chief investment strategist and chief economist at Citi Global Wealth.

Major economies have proven surprisingly resilient to sharp interest rate increases from central banks over the last two years. This has been particularly evident in the U.S., with recession thus far avoided and the labor market remaining robust.

Talk has now turned to rate cuts as inflation remains on a downward trajectory toward central banks’ targets, while growth has slowed.

Wieting told CNBC’s “Squawk Box Europe” on Monday that he is optimistic the global economy does not need an “economic collapse” to rein in inflation.

“We had one massive shock — one pandemic, one collapse. We didn’t need two recessions to ultimately cure our inflation problem,” he said.

“It’s holding down parts of our economy now — manufacturing and trade declines are happening around the world — but these are likely to bottom within the year.”

U.S. headline inflation came in at an annual 3.4% year-on-year in December, remaining above the Federal Reserve’s 2% target but down considerably from a peak of 9.1% in June 2022.

Investors will be closely watching Friday’s personal consumption expenditure (PCE) inflation figure, the Fed’s preferred metric, for further clues as to when the central bank will begin cutting rates.

Meanwhile, a preliminary estimate of fourth-quarter GDP is scheduled for Thursday, with the economy expected to have grown by 1.7%, its lowest rate since the 0.6% decline in the second quarter of 2022.

“This period of slower global growth and slowing employment growth in the United States we think can pass and lead to a healthier growth period if we take a look particularly at the next year and beyond, and that’s this year’s business for investors,” Wieting said.

He highlighted that while there is excess that needs to be worked out of the economy, this was not the result of a “true overheating” or prolonged “boom,” but instead of excess government fiscal stimulus related to the pandemic recovery that wasn’t going to be repeated.

“If you take a look at money supply in the United States, it declined 4% over the past year. Take a look at the 1970s, it was almost 10% growth for the entire decade, important prices surging 14% every single year — that’s … sustained inflation,” Wieting said.

“This story with just all of this government spending coming and going — upheaval in supply and demand, consumer spending going up or down 30% between goods and services, during the pandemic period — that’s not the environment we’re in any longer.”

The immediate ban on nearly all Palestinian workers to enter Israel following the Hamas-led terror attack of Oct. 7 has dealt a shock to the Israeli economy, the country’s central bank chief said at the World Economic Forum in Davos.

“We’re working in a very uncertain environment, as you can tell, and I would say there are two types of shocks: there is a supply shock,” Bank of Israel governor Amir Yaron told CNBC’s Dan Murphy. “And it’s primarily in the construction industry where … a third of that industry is Palestinians from the West Bank, and now they’re not coming in to work.”

“It’s also affecting agriculture, where they are in, and there are other foreign workers,” Yaron said. “So that will take a little bit, that’s a negative supply shock, and it could affect prices going up towards the second half of the year.”

He said that the bank must monitor these price developments, adding, “On the other hand, we’ve seen negative demand shock, obviously in a war. And so far that negative demand shock has been the most dominant one. And we will have to monitor that as well, as we go forward with how we are thinking about continuing with monetary policy.”

Before Oct. 7, more than 150,000 Palestinian workers from the occupied West Bank entered Israel daily for work in a range of sectors, predominantly in construction and agriculture.

The ban on most of these workers returning to their employment in Israel has dramatically hurt the economy of the West Bank. It has also contributed to anger and rising unrest over Israel’s decades-long occupation and its relentless bombardment of the Gaza Strip, which Palestinian health authorities say has killed more than 24,000 people. The Israeli offensive began after Hamas militants from Gaza launched a surprise attack on southern Israel that killed some 1,200 people and took another 240 hostage, of which 136 people remain in captivity.

In late December, Israel’s finance ministry warned that the ban on Palestinian workers could cost Israel’s economy billions of shekels per month.

“We calculated what the economic damage would be if Palestinians do not go to work…and it is estimated at approximately NIS 3 billion ($830 million) per month,” a representative of the finance ministry told Israel’s parliament, the Knesset, at the time, according to local media.

Business and factory owners in December pressured lawmakers to allow between 8,000 and 10,000 Palestinian workers to return to their jobs in Israeli settlements and businesses in the West Bank.

In comments reported by the Times of Israel, Raul Sargo, president of the Israel Builders Association, had told the Knesset: “We are in very dire straits … The industry is at a complete standstill and is only 30% productive. Fifty percent of the sites are closed and there is an impact on Israel’s economy and the housing market.”

Israel’s agriculture sector is also heavily dependent on foreign labor, in particular workers from Thailand — at least 10,000 of whom have left the country after the October attack, during which many Thai farm workers were killed and taken hostage.

Asked about what tools the bank has at its disposal to respond to a potential expansion of the war to Israel’s northern border with Lebanon, Yaron stressed the focus on preventing financial instability.

“We all hope it doesn’t happen. In case it does, then your mindset becomes financial stability,” the banker said. “That means the whole view on interest rate process … expansionary monetary policy probably stops, and you use the types of tools we’ve used so far, like the FX or things like that, and we hope we don’t need to go there.”

Yaron added that he was optimistic about his country’s ability to deal with shocks, given its familiarity with wars over the decades.

“I think we still have to remember, Israel is a dynamic economy,” he said. “It’s resilient, it has shown it can bounce back … pretty much over every military event, it has shown that it can come back and grow fast. I would say, actually, Homeland Security, economics has demand for that has grown. And hopefully, if there is a day after in which there’s a better environment with moderate states, those will bring in also new opportunities.”

Headline inflation in the euro zone jumped to 2.9% in December, up from 2.4% the previous month, though core inflation continued to ease.

The annual print was a little lower than the 3% forecast in a Reuters poll of economists.

Core inflation — which doesn’t include energy, food, alcohol and tobacco prices — cooled to 3.4% last month from 3.6% in November.

An overall rise was expected due to base effects from the energy market, as price falls moderate. Energy prices were down 6.7% year-on-year in December, versus a 11.5% fall in November.

Friday’s data will add to the debate over the trajectory of the European Central Bank’s policymaking, with markets expecting rate cuts to begin before the summer.

The headline inflation rise “is essentially a technicality,” Michael Field, European market strategist at Morningstar, said in a note.

“Oil prices fell massively from their 2022 highs, but in December the caps that many European governments had placed on energy prices ran out, meaning the prices consumers paid went up, which has impacted inflation,” Field said.

Central bankers were aware this spike could be coming and so it is unlikely to impact their decision-making, Field said, adding that January’s print will be crucial to see if the downward trend resumes.

LONDON — U.K. inflation fell by more than expected in to hit 3.9% in November, in the lowest annual reading since September 2021.

Economists polled by Reuters had expected a modest decline in the headline consumer price index to 4.4%, after the 4.6% annual reading of October surprised to the downside by dropping to a two-year low.

Month-on-month, headline CPI fell by 0.2%, compared to a consensus forecast of a 0.1% increase.

Core CPI — which excludes volatile food, energy, alcohol and tobacco prices — came in at an annual 5.1%, well below a 5.6% forecast.

The surprisingly large falls prompted a spike in bets that the Bank of England will cut interest rates in 2024, which manifested in a sharp fall in British bond yields.

The U.K. 10-year gilt yield sunk to an eight-month low, dropping 11 basis points to around 3.54%. Yields move inversely to prices. Meanwhile, the U.K.’s FTSE 100 was the only major European stock index in positive territory on Wednesday, climbing 0.8% by mid-morning trade.

The Office for National Statistics said the largest downward contributions came from transport, recreation and culture, and food and non-alcoholic beverages.

The Bank of England last week maintained a hawkish tone as it kept its main interest rate unchanged at 5.25%. The Monetary Policy Committee reiterated that policy is “likely to need to be restrictive for an extended period of time.”

The central bank ended a run of 14 straight interest rate hikes in September, as policymakers looked to wrestle inflation back down towards the Bank’s 2% target from a 41-year high of 11.1% in October 2022.

U.K. Finance Minister Jeremy Hunt cheered the Wednesday figures and said the country was “starting to remove inflationary pressures from the economy.”

“Alongside the business tax cuts announced in the Autumn Statement this means we are back on the path to healthy, sustainable growth,” he said in a statement.

“But many families are still struggling with high prices so we will continue to prioritise measures that help with cost of living pressures.”

Significant fall ‘undermines’ Bank of England caution

The Bank of England has repeatedly pushed back against market expectations for significant cuts to interest rates in 2024, noting last week that “key indicators of U.K. inflation persistence remain elevated.”

Suren Thiru, economics director at ICAEW, said the “startling” fall in inflation recorded on Wesdnesday will reassure households that there is a “light at the end of the tunnel,” with easing core CPI figures showing that underlying price pressures are relenting.

“The likely squeeze on wages from rising unemployment and a stagnating economy should help to continue to keep them on a downward trajectory,” he said by email.

“These inflation numbers suggest that the Bank of England is too pessimistic in its rhetoric over when interest rates could start falling. A deteriorating economy could push the Bank to start loosening policy by the Autumn, particularly if inflationary pressures continuing easing.”

A ‘glimmer of relief’

Richard Carter, head of fixed interest research at Quilter Cheviot, said the latest inflation print adds to a sense of “cautious optimism” in the U.K. relative to the cost of living crisis and bond market chaos of last year.

Despite the drop in CPI, he noted that the broader economic picture remains “complex, marred by stagnation and subdued growth prospects.”

The U.K. economy contracted by 0.3% month-on-month in October, after flatlining in the third quarter.

“This stagnation, leaving the output no higher than it was in January, paints a picture of an economy struggling to rebound from a series of unprecedented challenges,” Carter said over email, while acknowledging that the pace at which inflation is slowing offers a “glimmer of relief” for households.

“The pressures are manifold – from the cost of living crisis, volatile energy markets, Brexit aftershocks, to enduring productivity issues. These factors have collectively dampened economic prospects and consumer confidence.”