Wholesale prices stayed flat in September, suggesting inflation is on a downward path despite some bumps in the road.

The Producer Price Index (PPI) for final demand, a measure of wholesale prices, was unchanged in September from August, the Bureau of Labor Statistics said Friday. That was less than the 0.2% increase in August, and below the 0.1% increase forecasters had expected, according to a survey of economists by Dow Jones Newswires and The Wall Street Journal. Over the year, prices were up 1.8%, less than the 1.9% ♚ꦇannual change in August.

Why Does Wholesale Inflation Matter?

The PPI is an indicator of where inflation is headed because busღiness costs are ultimately passed on to consumers.

Economists use it, together with other economic data such as the Consumer Price Index, to forecast inflation as measured by Personal Consumption Expenditures, which is due to be released Oct. 31. Based on the data so far, PCE inflation is likely to have risen only moderately in September, economists said.

That could have implications for financial markets and borrowing costs for all kinds of loans. PCE inflation is the measure Federal Reserve policy makers prefer to use when🤪 considering price increases.

What Does Friday's Report Mean For the Fed?

Fed officials cut the central bank's benchmark interest rate in𓆏🐽 September by halfꦡ a percentage point, and plan to cut it further in the coming months as long as iꦇnflation continues falling toward the Fed's goal of a 2% annual rate.

Higher-than-🥀expected consum🍸er price inflation in September cast some doubt on those plans, but the PPI report sugg꧒ests they may stay on track after all.

"The latest data won’t throw off the Fed’s plan to recalibrate policy from a position of economic strength," Oren Klachkin, financial markets economist at Nationwide, wrote in a commentary.

The tame increase in wholesale prices in September was largely due to a 2.7% decrease in energy prices. That's unlikely to be repeated in October because conflict in the Middle East has d꧋riven up⛦ oil prices this month, Samuel Tombs, chief U.S. economist at Pantheon Macroeconomics, said in a commentary. Additionally, Hurricanes Helene and Milton could cause "a brief period of price gouging," temporarily pushing up prices, he said.

However, Tombs said that inflation is likely to stay on its recen꧋t downward trajectory, partly because businesses now have little ability to raise prices without losing customers.

"Disinflation trends remain well-embedded," he wrote.