Following the welcome announcement that consumer price index inflation finally leveled off in May, the Bureau of Labor Statistics found that wholesale prices, often a leading indicator of the inflation passed on to the public, actually deflated last month. While the Federal Reserve reiterated after its June meeting that it needs many more months of solid data to prove that the hottest inflation in 40 years is returning to its 2% target, the slowing CPI print in May coupled with a 0.2% decrease in the producer price index encapsulates the sort of unambiguously good data the central bank requires before it slashes the federal funds rate from its highest level in 23 years.

PPI increased for three months in a row at the start of this year, more than doubling from 0.9% in January to 2.3% in April on an annualized basis. This month, it fell to 2.2%, while core PPI fell to 2.3%. Tellingly, service prices, which fueled the bulk of this spring’s inflation resurgence, actually held constant. In practice, this PPI report could bode well for prices passed down to consumers.

It’s worth reiterating what the Fed said on Wednesday. Across the board, inflation remains way too high. Wholesale and personal consumption expenditures price index inflation are both well above the Fed’s target, and CPI inflation is nearly twice the rate. One month is a single data point, and in order to justify cutting rates, the Fed needs to see a trend.

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Furthermore, much of the PPI decrease came from falling energy prices and their related costs. As I explained yesterday, that’s a consequence of both falling consumer demand for travel as well as President Joe Biden flooding the petroleum market with an extra million barrels of oil from the government stockpile to lower prices artificially before Independence Day weekend.

With the White House pursuing an explicitly inflationary fiscal policy otherwise, the central bank still faces an uphill battle. The war is far from won. Victory will require months with data like this.