U.S. Producer Prices Rise Slower Than Expected

Investing.com – U.S. producer prices saw a slower-than-anticipated increase in December, indicating a potential easing in inflation that may influence the Federal Reserve’s future interest rate decisions.

The Producer Price Index (PPI) for final demand rose by 0.2% month-on-month, as reported by the Labor Department on Tuesday. Economists had expected it to align with November’s 0.4% increase.

The December rise was primarily due to a 0.6% increase in the index for final demand goods, while service prices remained unchanged.

On a year-over-year basis, the PPI increased by 3.3%, up from 3.0% the previous month, but below predictions of 3.5%.

Additionally, prices for final demand foods, energy, and trade climbed by 0.1%, matching November’s increase, and recorded a 3.3% rise in 2024, compared to 2.7% in 2023.

This report precedes a fresh assessment of consumer prices later in the week. These data points, combined with last week’s strong employment figures, may affect inflation forecasts and consequently Fed monetary policy going forward.

Analysts at Vital Knowledge described the PPI data as providing “fairly large relief” for investors following a robust nonfarm payrolls report. Concerns have recently intensified that strong economic indicators and President-elect Donald Trump’s stringent tariff policies could trigger renewed price pressures, raising yields on the benchmark 10-year U.S. Treasury note and diminishing the appeal of stocks.

There are growing uncertainties regarding the Fed’s potential for interest rate cuts this year after a full percentage point reduction in 2024. Bank of America analysts even suggest the central bank might consider raising rates again.