US producer prices dropped by most in more than two years in December as cost of energy products and trade services fell, adding to signs of tame inflation that may allow Federal Reserve to be patient about raising interest rates this year.Other data on Tuesday suggested manufacturing activity slowed further at start of year, with a measure of business confidence in New York State tumbling to more than a 1-1/2-year low in January.Fed Chairman Jerome Powell said last week that low inflation afforded policymakers ability to be patient and watch patiently and carefully while they monitored economic data and financial markets for risks to growth.
The US central bank has forecast two rate increases for 2019.We expect Fed to sit tight until June, and odds are rising that it could be an even longer pause given absence of an acceleration in inflation, past tightening in financial market conditions, slowing in global economy and uncertainty surrounding geopolitical events, said Ryan Sweet, a senior economist at Moodys Analytics in West Chester, Pennsylvania.The Labor Department said its producer price index for final demand dropped 0.2 per cent last month after edging up 0.1 per cent in November.
That was first decline since February 2017 and largest decrease since August 2016.