Don't Write Off Inflation Threat

If you thought a decline in wholesale inflation might prompt the Federal Reserve to reconsider its interest rate strategy, you'd be wrong.

In December, the producer price index fell 0.7%, its biggest decline since April 2003, as energy prices declined 4.0% and food prices rose just 0.1% after climbing sharply in the wake of four hurricanes. Excluding food and energy, the core PPI gained just 0.1%.

Economists were looking for the headline rate to fall 0.2%, while the core rate was expected to increase by 0.2%. ...