The Producer Price Index (PPI) rose 0.2% in December, beating expectations, as core prices remained unchanged. The news brought some relief to markets ahead of tomorrow’s consumer price index (CPI) inflation release.
However, the modest gain may not have been enough to calm nerves, as a jump in airfares last month could impact the Federal Reserve’s primary inflation gauge, the core PCE price index. This data is closely watched by the Fed and can influence its decision on interest rates.
The overall PPI increase of 0.2% matches the consensus estimate, while core PPI inflation rose 0.0% on the month, matching expectations. The 12-month inflation reading of 3.5% was higher than estimates, reflecting upward revisions to past data.
The impact of this report is significant for the Fed, as the PPI and CPI provide key inputs into its primary inflation measure, the core PCE price index. Markets are now pricing in a 3% chance of a Fed rate cut on January 29, with odds ranging from 20% to 55% for various meetings.
In other news, the S&P 500 slipped 0.5% late Tuesday morning after early gains, finishing 4.2% off its record closing high. The 10-year Treasury yield edged down to 4.79%.
Source: https://www.investors.com/news/economy/ppi-inflation-cpi-federal-reserve-trump-tariffs-sp-500