WASHINGTON, June 15, 2023 (BSS/AFP) - US wholesale prices shrank more than expected in May, according to data released Wednesday by the Labor Department, due largely to a steep drop-off in energy demand.

The decline in the producer price index (PPI) provides further evidence of slowing inflation, giving the Federal Reserve another data point to mull over as it weighs the prospect of a further interest rate hike.

The US central bank is set to announce later Wednesday if it will move ahead with an 11th straight rate increase to control above-target inflation.

But most analysts expect it to skip a rate hike this time to give policymakers more time to assess the health of the US economy.

The PPI dropped by 0.3 percent last month, the Labor department said, after recording a small increase in April.

Sixty percent of the decline in final demand goods "can be traced to a 13.8-percent drop in prices for gasoline," the report added.

The department noted that the indexes for diesel fuel, chicken eggs, jet fuel, fresh and dry vegetables, as well as iron and steel scrap also fell.

Final demand services advanced by 0.2 percent in May, with more than 40 percent of the increase attributed to "margins for automobiles and automobile parts retailing, which rose 4.2 percent," the report said.

"Goods inflation is now negative, and services inflation resumed its downward trend in May," said economist Matthew Martin of Oxford Economics in a note.

Along with consumer inflation data released a day earlier, "the report supports our call for the Fed to pause rate hikes at today's meeting and to keep rates on hold through year end," he added.