Inflationary Pressure Increases in June 2006

NewsEdge reports:

The United States' producer prices rose by a larger-than-expected 0.5 percent in June, and core inflation increased 0.2 percent as expected, the Labor Department reported July 18.

Higher energy and food prices accounted for most of the gain in June in the producer price index for finished goods.

Energy prices rose 0.7 percent in June, as wholesale gasoline prices jumped a surprising 6.3 percent. Natural gas and residential electricity prices fell. Food prices rose 1.4 percent, the most since October 2004.

The core rate --which excludes more volatile food and energy prices-- was boosted by a 0.9 percent increase in passenger car prices and a solid 0.3 percent gain in capital goods prices.

Some analysts said the report added to the Federal Reserve's worries about inflation.

"Today's producer price data indicate that another interest rate hike is likely," said Peter Morici, a business professor at the University of Maryland.

Even if the Fed stopped tightening(which we doubt),the long end of the curve has to be concerned about inflation.