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2h ago

January PPI Surprises to the Upside, Pressuring Markets and Rate-Cut Bets

The stronger wholesale inflation reading heightens expectations that the Federal Reserve will hold off on cutting rates.

A worker handles components for a steel sieve at HCC, a company that uses parts to make combines, at the factory in Mendota, Illinois, on February 21, 2025. REUTERS/Vincent Alban
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Overview

  • U.S. producer prices rose 0.5% in January and 2.9% year over year, with core PPI up 0.8% on the month and 3.6% annually, all above forecasts.
  • Services drove the increase as trade-service margins jumped 2.5%, including a 14.4% surge in professional and commercial equipment wholesaling, while goods prices fell 0.3% with energy and food down.
  • Equities fell sharply after the release, with the Dow down roughly 700 points and major indexes lower, while bitcoin dropped about 2–3% and the dollar strengthened.
  • Economists said the pattern points to tariff costs moving through supply chains, and several noted the risk that wholesale pressures could feed upcoming consumer inflation gauges.
  • Parts of PPI feed into the Fed’s preferred PCE measure, focusing attention on the March 13 PCE report and the delayed February PPI on March 18 to gauge persistence.