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Once more, the figures show that this nation just does not have an inflation problem, at least at this point, which explains the ability of the Federal Reserve to continue pursuing an easy and accommodative monetary policy.

Specifically, earlier this morning, the U.S. Labor Department reported that the Producer Price Index fell by 0.7% in April, which was 0.1% more than the decline of 0.6% generally expected. In all, this was the second drop in wholesale pieces in as many months, and the fifth decline in the past seven months. 

Meanwhile, if we back out the volatile food and energy components from the mix to get the so-called core PPI reading, we find that this metric rose by a scant 0.1% last month, thereby matching expectations. The core rate of inflation at the producer or wholesale level has been very steady so far this year, rising either by 0.1% or 0.2% over the first four months of 2013. In fact, we have seen this gauge range from an unchanged reading to a rise of just 0.2% every month since last August, which, likewise, explains the Fed's willingness to hold the line on its monetary policies.

As to the food and energy components, prices in the former area fell last month, dropping by an outsized 0.8%. This has been a very volatile metric so far in 2013, having gained 0.6% in January, then falling by 0.5% in February, before rising 0.8% in March. In all, food costs have ranged from an increase of 1.1% to a decline of 0.8% every month between last October and this April.

Energy prices, meanwhile, have been even more volatile, falling by 3.4% and 2.5%, respectively over the past two months, following an increase of 3.0% in February.

Taken together, this was a solid and reassuring report, and should continue to give the central bank all of the flexibility its needs to continue its easy monetary ways in support of the irregular and at times halting economic expansion in this country. 

At the time of this article’s writing, the author did not have positions in any of the companies mentioned.