A key inflation gauge showed a surprise 0.2% decrease in prices of wholesale goods — just a day after the latest consumer price index showed that the cost of retail goods were trending downward.

The producer price index, which measures prices that producers get for goods and services in the open market, declined 0.2% in May, according to a report from the Bureau of Labor Statistics.

Analysts anticipated that PPI prices would rise 0.1%. In April, the PPI was up 0.5%.

In the 12 months through May, the PPI increased 2.2% after rising 2.3% in April.

When excluding food, energy and trade services, PPI was unchanged. Analysts expected that PPI would rise 0.3%.

The S&P 500 futures and Nasdaq futures surged in pre-market trading after the release of the PPI report.

The encouraging inflation data has buoyed hopes that the US economy is in for a “soft landing” — reducing inflation while avoiding a recession and massive unemployment.

Fed Chair Jerome Powell noted in a press conference at the end of the central bank’s policy meeting that inflation had fallen without a major blow to the economy, and said there was no reason to think that trend can’t continue.

The Fed left interest rates unchanged on Wednesday.

The central bank on Wednesday kept its benchmark overnight interest rate in the current 5.25%-5.50% range, where it has been since last July.

The Fed has raised its policy rate by 525 basis points since March 2022 to stamp out inflation.

Powell also reiterated policymakers would need to see further evidence that prices were cooling before cutting rates.

Fed officials, meanwhile, reined in projections for how aggressively they would cut rates this year, from three 25 basis point rate cuts to just one — a shift that was largely expected by investors.

The soft landing narrative has been an important one for markets in recent months.

Investors started the year pricing in more than 150 basis points of rate cuts but quickly rolled back those bets when it became evident that the economy was too strong for the Fed to ease monetary policy without risking an inflationary rebound.

With Post wires

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