US producer prices fell by a much larger-than-expected 1.4% in August as energy prices fell, government data showed today, in good news for the Federal Reserve as it weighs an interest rate cut.
The Labor Department said it was the largest fall in producer prices since a 1.5% dip in October 2006, while the 6.6% decline in finished energy prices last month was the sharpest fall since April 2003's 8% drop.
Less inflation gives policy makers more reason to lower interest rates later today in an effort to sustain the expansion as housing tumbles.
A drop in fuel expenses pushed prices down in August and slower economic growth will continue to keep a lid on raw- material costs in coming months, economists said.
Petrol prices fell 13.8% last month, marking their largest drop since September 2006 when they fell 15.9%, the Labor Department said.
However, oil has since rebounded and US crude oil notched a fresh record today of $81.24 a barrel.
Producer prices were released as the Federal Reserve gathered to consider a cut in US interest rates to ward off the impact of a credit crunch stemming from problems in the subprime mortgage market on the wider economy.
