Wholesale prices drop, calming inflation fears
Wholesale prices fell a 0.3 percent last month, the Labor Department announced yesterday, calming inflation fears and making it unlikely that the Federal Reserve will boost interest rates any time soon.</br></br>The June decline was the first since November; in May, producer prices were unchanged from the previous month.</br></br>Stock and bond markets reacted sluggishly to the news because investors are waiting to hear the announcement of consumer price inflation, to be released today, and to see what impact floods in the Midwest will have on crop production, analysts said.</br></br>The Dow Jones industrial average was off 8.94 points to end at 3515.44. Short-and mid-term interest rates rose slightly. Usually, interest rates drop when investors believe inflation is falling, but the decline in the producer price index was expected, according to Donald H. Straszheim, chief economist at Merrill Lynch & Co. in New York.</br></br>"In the first six months of the year there has been this inflation fear that has arisen, and it increasingly looks like that fear was misplaced," Straszheim said. "What this report tell us is, the weak economy still seems to be reflected in low inflation."