Inflation for wholesalers was negative last month.

From marketplace, I'm Surib Benashore in for David Brancaccio.

Inflation at the wholesale level actually reversed a bit in May. Prices came down two-tenths of a percent, according to the producer price index out this morning. Overall, inflation, we learned yesterday, paused for May. But if you compare prices to a year ago that is a different ball game.

Overall inflation is still 3.3% year over year. So what do we do with that? What's the

Federal Reserve do with that? Diane Swank is chief economist at tax audit

advisory firm KPMG.

Good morning.

Good morning.

So just this morning, we got the producer price index

measuring inflation at the wholesale level.

It actually reversed a little bit.

Prices went down two-tenths of a percent, at least in that month.

How important is that?

I think the important message from the Federal Reserve is that yes we appreciate the

cooling but we need a lot more evidence to be convinced before we cut rates because the worst

mistake a Central Bank can make is to prematurely cut rates and stoke a more pernicious

spot of inflation. So another piece of evidence or data that the Fed looks at is

wage growth. It's not that they don't want wages to grow at all. They just want them to grow at a sort of sustainable rate. How is that looking right now?

One of the things the Fed is concerned about is that the elevation in wages and the pace at which wages are growing, particularly in the service

sector where labor is a much larger share of the cost of services, so it shows up in prices as well,

is that it's still growing too fast to ensure we get back down to 2% and stay there.

I mean what the Fed's really looking for here is that inflation is no longer front of mind.

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