U.S. wholesale inflation jumped unexpectedly in July, a sign that higher prices could soon hit consumers. Claire Jones, an economics editor for the Financial Times, joins to discuss.

Washington

Newly released data shows U.S. wholesale prices rose by 0.9% in July, marking the fastest increase in three years and pushing the annual rate to 3.3%. This figure is significantly above the Federal Reserve's 2% inflation target. The surge is linked to the impact of tariffs, with retailers and wholesalers bearing much of the cost so far, though it remains uncertain if consumers will soon face higher prices.

The Federal Reserve is now in a challenging position, as it weighs the implications of rising wholesale prices against mixed signals from the labor market. While weekly unemployment claims have fallen modestly, other labor indicators have been less positive. The Fed is expected to closely monitor upcoming jobs data and economic revisions before making its next interest rate decision.

U.S. wholesale prices hit highest level in 3 years

eye on the markets today as newly released numbers give us a snapshot of the economy and the impact of President Trump's tariffs. Wholesale prices surge, a sign that higher prices could soon hit consumers. The index spiked 0.9% in July. That's the fastest rise in the past three years. And the wholesale prices we mentioned, well, they are up 3.3%. That is well above the Federal Reserve's 2% inflation target. We're joined now by Claire Jones, U.S. economics editor for The Financial Times. Claire, thank you so much for joining us today. What do today's higher than expected numbers tell us about the impact of President Trump's tariffs so far? Well, a real pleasure to be on, Mugo. We've heard a lot about how the impact of tariffs is going to be far less drastic than a lot of the Cassandras said. We saw up until this point a few quite decent inflation numbers. Today, I think, has been the first real upward shock, which suggests that, you know, we've been told that a lot of the burden is falling on foreign exporters, that they're cutting the prices, and that U.S. retailers and wholesalers and also U.S. consumers aren't going to bear too much of the burden. We still don't really know what's going to happen to U.S. consumers, but we know from this data that retailers and wholesalers are feeling quite some of the pain. Yeah. So what could this mean for interest rates? Could we finally see the Federal Reserve actually cut those rates? The president has been asking for it. I think this data just highlights what a tough position the Federal Reserve is in. Now, the Fed is looking at consumer prices, not producer prices. We still don't really know whether or not firms are going to pass on the burden to consumers or if they're going to cut their own – if they're going to kind of shrink their own margins and kind of bear the brunt of the cost of the tariffs themselves. We've also got a position where we've had some very mixed data on the labor market. The Fed tracks what's happening to the jobs market, too, and we had a very grim nonfarm payrolls report earlier this month. So the Fed is really – kind of it's a very tricky balance between looking at this report and thinking we may see consumers face higher prices in the months to come, and then taking into account what's happening to the U.S. labor market, which has not been very positive. So Fed officials are in a very tricky position. I think it's more likely than not that they will cut by 25 basis points in September, but it's a far less clear-cut decision than some in the markets might like to think. Yeah. Well, Claire, let's talk about this then, because Weekly Unemployment Claims numbers were also released today, and they showed a modest fall. So is that reason for any optimism in the jobs market? I mean, I think what – you know, Fed officials have got a while before they decide what to do in September. I think, you know, you can really find your own truth in the jobs data at the moment. There are a lot of indicators that suggest there are causes for concern, and that there are others, like today's number, which suggests the picture may not actually be that bad. Before the September rate decision, we're going to get another nonfarm payrolls report, and I'd expect the Fed to be far more guided by what that shows than what we've seen today. In the run-up to the meeting, we'll also see some big revisions for the past 12 months, which come out on September the 9th, and that should give us a lot more clues as to what's actually going on in the U.S. labor market and what has actually been going on in the run-up to the September vote. Okay. Claire Jones, economics editor at the Financial Times, thank you so much for joining us and thank you for your insights today. Real pleasure. Thank you.

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Breakdown