The U.S. inflation problem is getting worse

"It is getting harder and harder to chalk up the inflationary impulse evident in a wide range of data solely to the one-time effects of tariffs and the blockade of the Strait of Hormuz. That makes the chance of a Federal Reserve interest rate cut at any point this year increasingly remote, barring a stark turnabout in the inflation trend or labor market conditions."

"Even excluding volatile food, energy and trade services, the index was up a whopping 4.4% over the last year, the highest 12-month increase since 2023. Prices for services were up significantly, thanks to a 5% rise in transportation and warehousing prices - a sign that higher fuel prices are already having second-order effects on what it costs for other goods."

"[Wednesday's] report suggests that while the move higher in prices received by producers is primarily being driven by energy, we are also seeing a broader increase across other core components of the inflation basket,"

"“I believe it will likely be important to maintain the current slightly restrictive monetary policy stance for some time,” Boston Fed president Susan Collins said Wednesday morning at the Economic Club of Boston. “More than five years of above-target inflation has reduced my patience for 'looking through' another supply shock,” she added. “And while it is not my most likely outlook, I could envision a scenario in which some policy tightening is needed to ensure that inflation returns durably to 2% in a timely manner"

Producer prices for final demand increased 1.4% in April and rose 6% over the past 12 months. Excluding volatile food, energy, and trade services, the index climbed 4.4% year over year, the largest 12-month increase since 2023. Services prices rose notably, including a 5% increase in transportation and warehousing, indicating higher fuel costs are spreading into other goods. The broader rise in core components suggests inflation pressures are not limited to energy-driven or one-time tariff and supply disruptions. With inflation above target for more than five years, Fed officials emphasize maintaining a restrictive stance and warn that policy tightening could be needed to return inflation durably to 2%.

Read at Axios