Around the end of 2018, the annual inflation rate of the US producer price index (PPI) began a downtrend which then continued through 2019. Months in which prices received by producers increased suggested the trend may have been coming to an end, only for it to continue. In the current climate, it is reasonable to expect the downtrend to be maintained.
The figures from March have been published by the Bureau of Labor Statistics and they indicate producer prices fell by 0.2% after seasonal adjustments, higher than -0.3% which had been generally expected and more than February’s revised 0.6% fall. On a 12-month basis, the rate of producer price inflation after seasonal adjustments slowed to 0.7% after recording 1.3% in February and 2.1% in January.
“Core” PPI inflation increased by 0.2%, a turnaround from February’s 0.3% fall. Its annual rate ticked up from 1.3% to 1.4%.
US Treasury bond yields finished a little lower. By the end of the day, the US 2-year Treasury yield had shed 3bps to 0.22%, the 10-year yield lost 4bps to 0.73% and the 30-year yield finished 4bps lower at 1.35%.
Expectations of any change in the federal funds rate over the next 12 months remained negligible. According to end-of-day prices of federal funds futures, the implied probability of the federal funds range changing from 0%-0.25% remained at 0%.