PPI Weakens Case For Big Interest-Rate Cut

By John S. McClenahen December's 0.3% rise in so-called core wholesale price index, reported Jan. 12, weakens the case for the Federal Open Market Committee to lower short-term interest rates by as much as half a percentage point (50 basis points) when it meets in two weeks. The reason: increased concern over inflation. Last month's rise in the core producer price index (PPI), which excludes the relatively volatile energy and food sectors of the U.S. economy, contrast with no change in November 2000 and an actual 0.1% decline in October. December's overall PPI was unchanged, and it is that less worrisome number that Jerry J. Jasinowski, president of the National Assn. of Manufacturers, Washington, focuses on in continuing to press the case for lower interest rates. "This winter inflation is hibernating as the pace of [U.S. economic] growth continues to slow, and since the threat of a protracted slowdown remains much more serious than the threat of inflation, the Fed should lower interest rates again later this month," says Jasinowski.

Hide comments


  • Allowed HTML tags: <em> <strong> <blockquote> <br> <p>

Plain text

  • No HTML tags allowed.
  • Web page addresses and e-mail addresses turn into links automatically.
  • Lines and paragraphs break automatically.