US producer prices increased by 0.2% in December, driven by higher energy costs. The Labor Department reported that the producer price index rose 3.3% compared to last year, the largest gain since February 2023. Energy prices led the increase, with a 9.7% jump in gasoline prices and a 3.5% rise from November to December.
Food prices fell by 0.1% in December, while core wholesale inflation remained unchanged from November but rose 3.5% compared to last year. The producer price report comes ahead of the Labor Department’s consumer price index release on Wednesday, which is expected to show a 0.3% increase from November and a 2.8% rise from December 2023.
Wholesale prices provide an early look at potential consumer inflation trends, while also influencing the Federal Reserve’s preferred inflation gauge, the personal consumption expenditures (PCE) index. The Fed has raised interest rates to combat inflation since 2021, and although progress has stalled in recent months, officials are cautious about cutting rates this year.
Economists expect a more cautious approach from the Fed, with only two rate reductions projected for 2025, down from four forecasted earlier. Some worry that President-elect Donald Trump’s policies, including tariffs and tax cuts, could push inflation higher. “The Fed will not see any argument for pushing interest rates lower,” said Carl Weinberg, chief economist at High Frequency Economics.
Source: https://apnews.com/article/economy-inflation-manufacturers-prices-federal-reserve-c62ea1279b4c616129e474d3d2108d9f