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Ahead of the Bell: US producer prices

January 15, 2016

WASHINGTON (AP) — The Labor Department reports on U.S. producer price inflation in December. The report will be issued at 8:30 a.m. EST Friday.

PRICES DOWN: The expectation is that prices charged by farmers, manufacturers and other producers fell 0.1 percent in December, according to a survey of economists by data firm FactSet.

LOW INFLATION: In November, the department’s Producer Price Index, which measures inflation pressures before they reach the consumer, rose by 0.3 percent, the first increase in four months.

Inflation at the consumer level has also been low this year with the Consumer Price Index up just 0.5 percent in the 12 months ending in November. And a price gauge favored by the Fed is up just 0.4 percent for the 12 months through November and shows a 1.3 percent gain when energy and food are excluded. That’s well below the Fed’s 2 percent target for inflation.

The central bank last month boosted a key interest rate for the first time in nearly a decade, pushing it from a level near zero to a range of 0.25 percent to 0.5 percent with private economists expecting more rate hikes this year.

However, Fed officials stressed that the pace of the future rate increases will be heavily dependent on the currently low level of inflation showing evidence of moving toward the Fed’s 2 percent target.

On Thursday, James Bullard, president of the Fed’s St. Louis regional bank, said in a speech that the latest big drop in energy prices could mean that it will take longer to get inflation back to the Fed’s 2 percent target.

The fall in energy prices has meant more good news for consumers. The nationwide average for gasoline is now under $2 per gallon at $1.94, down about 8 cents in just the past month and 16 cents lower than a year ago.

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