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Producer price inflation continues to accelerate

At the producer level, rising inflation is now unmistakable and indisputable. Even excluding food and energy, producer prices have been rising at a 2% annual rate since the beginning of last year, after rising by only 0.9% in 2009. Moreover, core producer prices rose at a 4.2% annualized pace in the first three months of this year.

This chart plots the producer price index on a semi-log scale, in order to highlight the different inflation regimes of the past several decades. Producer price inflation now appears to be accelerating beyond the 3.5% annual pace which prevailed from 2004 through last year, and far beyond the 1.7% annual pace which prevailed for the preceding 20 years. Over the past six months, the PPI is up at an annualized pace of almost 11%; over the past three months, prices have risen at an astounding 13% annualized pace.

These charts are an early-morning wakeup call that continues to be ignored by groggy Fed chairmen.

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