Summary
Oil prices are coming down and are starting to reduce the pricing pressure that had been building in the economy, at least for now. A barrel of benchmark crude oil, West Texas Intermediate, is now fetching $80 at the New York Merc. That’s up a bit from $68 two weeks ago, but down from $112 in April as the war in Iran flared. The impact of lower oil prices was evident in two important inflation reports released this week. The first report was the Consumer Price Index (CPI), which is the most widely quoted inflation measure in the financial press. CPI rose at a 3.5% rate year over year through June, down sharply from the prior month’s reading of 4.2% — though still a far cry from the Federal Reserve’s stated goal of 2.0%. Moving up the value chain, the Producer Price Index (PPI) report came out Wednesday. PPI has risen at a 5.5% annual rate through June, down from a 6.5% rate in May. Though these latest rates are indeed lower, we think it is premature to suggest that inflation is on a downward trek. Pricing pressures peaked