MercoPress. South Atlantic News Agency

Markets waiting for US consumer prices index out Friday

United States wholesale prices soared 0.9% in May pushed mainly by a 10.2% rise in fuel prices adding to concerns over continuing inflation risks and fears over further interest rate rises.

However excluding volatile food and energy prices, core inflation was up a more moderate 0.2% according to the US Labor Department. But analysts said the surprise rise in wholesale prices did not change their overall view on the inflation outlook. The consumer prices index which is out on Friday will be closely followed to see whether retailers have passed on rising wholesale prices to consumers. If this is the case it would have a direct influence on US interest rates which for the last year have been standing at 5.25%. The Federal Reserve next meeting to consider rates is scheduled for June 27/28. Market expectations were that the Fed could shave 25 points of the rate by the end of the year, but it now seems it may raise the rate to help control inflation. In related news the US Treasury Department reported the US federal budget deficit is running much slower through the first eight months of the current fiscal year which ends next October. Data released by the department showed that the budget deficit through May totaled 148.5 billion US dollars, down 34.6% from the same period a year ago. The improvement came as growth in revenues outpaced the growth in spending. So far this fiscal year, revenues have increased by 8% from a year ago to an all-time high of 1.6688 trillion US dollars, while outlays have rose at a slower pace of 2.5% to 1.8172 trillion dollars, also hitting a record. For May, however, the deficit surged to 67.7 billion, up 57.8% from the same month of 2006. The surge resulted from the fact that the Internal Revenue Service was more efficient in processing tax returns this year, meaning more revenue was collected in April with fewer tax collections left to be counted in May, according to analysts. At present, the Bush administration is expecting the budget deficit for all of the current fiscal year to be 244 billion, slightly below the 248.2 billion in the 2006 fiscal year, which had been the lowest imbalance in four years. But the Congressional Budget Office now is projecting the deficit for the full fiscal year to be 177 billion. US government budget deficit set a record of 413 billion in 2004. In the budget sent to Congress in February for 2008, the Bush administration projected the government could eliminate the deficit completely and return to a surplus by 2012. The federal budget was in surplus for four years from 1998 through 2001.