U.S. Producer Prices Rise Moderately in December

WASHINGTON (Reuters) – U.S. producer prices increased moderately in December, unlikely to change expectations that the Federal Reserve won’t cut interest rates before the second half of this year due to resilient labor market conditions.

The producer price index (PPI) for final demand rose 0.2% last month after an unrevised 0.4% advance in November, according to the Labor Department’s Bureau of Labor Statistics.

Economists polled by Reuters had predicted a 0.3% increase in the PPI.

Over the last 12 months ending in December, the PPI accelerated 3.3% following a 3.0% increase in November. This year-on-year surge is attributed to last year’s lower prices, particularly for energy products, dropping out of the calculation.

This report follows last week’s news of a sharp rise in nonfarm payrolls and a decline in the unemployment rate, leading economists to believe the U.S. central bank will maintain rates through June.

At least one Wall Street institution, Bank of America Securities, believes the Fed’s easing cycle is over. Goldman Sachs now anticipates two cuts this year in June and December, down from three previously projected cuts.

The central bank began its easing cycle in September, lowering its benchmark overnight interest rate by 100 basis points to the current 4.50%-4.75% range.

The last reduction occurred in December when policymakers also adjusted projections to two cuts this year, down from four expected in September.

The policy rate was increased by 5.25 percentage points in 2022 and 2023 to combat inflation. Concerns are rising that President-elect Donald Trump’s pledges to impose or elevate tariffs on imports and deport undocumented immigrants could further fuel inflation, as seen in the rise of consumers’ inflation expectations in January.