Wholesale prices rose 0.2% in December, less than expected
A customer purchases clothing at a Costco store in Novato, California, on December 11, 2024.
Justin Sullivan | Getty Images
Wholesale prices rose less than expected in December, suggesting pipeline inflationary pressures eased at the end of the year, but may not be enough to prompt the Federal Reserve to cut interest rates again soon.
The Producer Price Index rose just 0.2% this month, down from a 0.4% gain in November and below the Dow Jones consensus estimate of 0.4%, according to a Tuesday report from the Bureau of Labor Statistics.
Excluding food and energy, so-called core PPI was in line with expectations for a 0.3% rise. Excluding food, energy and trade services, the indicator rose just 0.1%.
On an annual basis, the overall PPI for the year rose by 3.3%, much higher than the 1.1% increase in 2023.
Commodity prices rose 0.6%, driven by a 9.7% rise in gasoline prices. Gains in some food and energy-related indicators were offset by a 14.7% decline in fresh and dried vegetable prices.
On the services side, prices remained flat despite a 7.2% increase in passenger traffic, offset by lower passenger accommodation prices.
Stock futures surged after the report, while Treasury yields were lower after rising sharply in early 2025.
The release is the first of two key inflation data this week that could influence the Federal Reserve's interest rate decision later in January.
On Wednesday, the Bureau of Labor Statistics will release more closely watched consumer price index data. The headline data and core data are expected to increase by 0.3% monthly, with annual inflation rates of 2.9% and 3.3% respectively.
Although the central bank focuses more on the Commerce Department's personal consumption expenditures price index as its main inflation gauge, PPI and CPI readings are also factored into the calculation.
Market pricing is overwhelmingly indicating that the Fed will remain on hold at its January 28-29 meeting. However, policymakers, particularly Chairman Jerome Powell, can lay the groundwork for where rates will go in the future.
Fed funds futures on Tuesday were pricing in just one rate cut for the rest of the year, and Bank of America economists said on Monday they think the Fed is likely to take action this year. Fed officials expected two rate cuts this year at their December meeting, assuming a 25 percentage point cut.