Wholesale inflation, as measured by the headline Producer Price Index (PPI), rose 1.8 percent in annual terms in September, while an index of underlying inflation jumped 2.8 percent, with both values exceeding market expectations and signaling that inflationary pressures continue to percolate.

The latest government report on inflation from the perspective of business input costs, released by the Bureau of Labor Statistics (BLS) under the U.S. Department of Labor on Oct. 11, painted a mixed picture of America’s inflationary environment.

The headline pace of wholesale inflation, which eventually tends to get passed along to consumers and therefore serves as a leading indicator of where the Consumer Price Index (CPI) is headed, inched down from an annualized 1.9 percent in August to 1.8 percent in September. Despite the decline, it defied market expectations for a deeper drop to 1.6 percent.

Core wholesale inflation, which excludes food and energy and is a measure of underlying inflationary pressures, rose to 2.8 percent year-over-year in September, up from 2.6 percent in August. This measure also surprised to the upside, as forecasters expected a 2.7 percent reading.

A measure of wholesale inflation that excludes food, energy, and trade services—sometimes referred to as super core inflation—ticked down from 3.3 percent in August to 3.2 percent.

In monthly terms, after advancing 0.2 percent in August, the pace of headline wholesale inflation came in flat in September, exceeding market expectations for a 0.1 percent increase.

The wholesale inflation data, released a day after the BLS reported that the CPI measure of consumer inflation rose at 2.4 percent year-over-year in September, left some analysts questioning the Federal Reserve’s decision to cut interest rates by 50 basis points last month. Lower interest rates tend to stimulate demand and stoke inflation.

“Both Core PPI and CPI inflation are now officially back on the rise. The Fed did not need a 50 basis point rate cut,” industry analytics firm The Kobeissi Letter wrote in a post on X.

“We still do not understand the rationale behind last month’s 50 basis point cut,” the group added in a separate post. “The Fed said we are in maximum employment, but they want to support the labor market. Do we really even need rate cuts?”

Fed policymakers opted for a bigger 0.5 percentage point rate cut in part because they judged that the risks to economic activity “were tilted to the downside” and that recent softening in some labor market indicators “could point to greater slowing in aggregate demand growth” than anticipated, according to minutes from the Fed’s most recent Sept. 17–18 policy meeting, which were released on Oct. 9.

At the same time, the minutes indicate that central bank officials judged that “further progress on disinflation” along with some cooling in economic and labor market indicators justified a rate cut.

Even though a “substantial majority” backed the jumbo 50 basis point cut, “some participants observed that they would have preferred a 25 basis point reduction of the target range at this meeting, and a few others indicated that they could have supported such a decision,” per the minutes, which serve as a detailed record of discussions during the policy meeting.

One concern that was raised in the discussions was that a bigger cut could signal to markets that the Fed was planning further large reductions, while no such decision had been taken.

“Several participants noted that a 25 basis point reduction would be in line with a gradual path of policy normalization that would allow policymakers time to assess the degree of policy restrictiveness as the economy evolved,” the meeting record states.

“A few participants also added that a 25 basis point move could signal a more predictable path of policy normalization,” it added.

As regards a more detailed breakdown of the BLS data on wholesale inflation, the month-over-month index of goods fell 0.2 percent in September, while the services index rose by 0.2 percent, leading the overall measure to remain flat.

The product detail showed that the gasoline index fell 5.6 percent in monthly terms, while processed poultry jumped 8.8 percent, with prices for electric power and motor vehicles also moving higher.

Some analysts, such as chief fixed income strategist Kathy Jones, saw the wholesale inflation data as suggesting that the “disinflationary trend should continue.”

Others, such as E.J. Antoni, an economist at The Heritage Foundation, said that the only reason the month-over-month wholesale inflation reading came in flat was because the inflation readings for the previous four months were revised upwards.

Jeffrey Tucker, founder and president of the Brownstone Institute, wrote in a recent op-ed for The Epoch Times, that he thinks all the inflationary trends “are headed for the worse.”

Tucker pointed out that the money supply is increasing, prices are rising again, and that the Fed’s recent decision to cut rates amounts to implementing a form of quantitative easing, which will fan inflationary pressures.

“Real-time inflation measures suggest a reacceleration and money stock levels are rising and at an 18-month high,” he wrote, adding that the Fed is slashing interest rates “in response to demands by Wall Street for looser credit and lax lending standards.”

“All of the trends point in only one direction: we are experiencing higher prices. Indeed we might be headed to wave two, consistent with the experience of the 1970s,” Tucker said, referring to the period of soaring inflation several decades back.

“No one wants to see what wave three looks like.”