Wholesale prices rose 0.2% in December, less than expected

A measure of wholesale prices rose less than expected in December, giving an indication that pipeline inflationary pressures eased to close out the year, although not enough to cause another Federal Reserve interest rate any time soon.

The producer price index rose just 0.2% in the month, less than the 0.4% increase in November and below the Dow Jones consensus estimate of 0.4%, according to a Bureau of Labor Statistics Report Tuesday.

Excluding food and energy, the so-called core PPI was flat compared with the forecast for a growth of 0.3%. Excluding food, energy and trade services, the measure rose just 0.1%.

On an annual basis, the headline PPI rose 3.3% for the full year, well ahead of the 1.1% increase in 2023.

Commodity prices rose 0.6%, driven by a 9.7% rise in gasoline prices. Upward movements in several food and energy measures were offset by a 14.7% decrease in prices for fresh and dried vegetables.

On the services side, prices were flat, despite a 7.2% increase in passenger transport that was offset by a drop in prices for traveler accommodation.

Stock market futures shot higher after the report, while Treasury yields moved lower after pushing much higher in the early days of 2025.

The release is the first of two key inflation readings this week that will likely figure into the Federal Reserve’s interest rate decision later in January.

On Wednesday, the BLS will release its closer reading on the consumer price index. That is expected to show 0.3% monthly gains both on the main and core readings and respective annual inflation rates of 2.9% and 3.3%.

Although the central bank focuses more on the Commerce Department’s personal consumption price index as its main inflation indicator, PPI and CPI readings figure into that calculation.

Market prices are overwhelmingly pointing to the Fed staying at the January 28-29 meeting. However, policymakers, and Chairman Jerome Powell in particular, could set the stage for what’s ahead in terms of rates.

Fed funds futures prices on Tuesday implied only one rate hike for the rest of the year; Bank of America economists on Monday said they think the Fed could be done this year. Fed officials at their December meeting wrote in the equivalent of two cuts this year, assuming movements of a quarter of a percentage point.