Blood is definitely running in the streets these days. The troubles at Fannie Mae and Freddie Mac and the run on IndyMac Bank are only the latest examples of the various ills afflicting the markets and the economy. Discouraging as all this is, the ongoing challenge of upward inflation momentum won’t help.
Today’s update on wholesale inflation for June suggests that inflation may get worse before it gets better. The annual pace of producer prices was an astonishing 9.1% through last month–the highest since 1981. And there’s no salvation in focusing on core wholesale prices, which rose by 3.1% for the year as of June–the highest since 1991.
No matter how you slice it, wholesale inflation has taken wing. We can only guess what tomorrow’s report on consumer inflation will show, but it would come as no surprise to see higher numbers on that front as well.