The PPI shows wholesale inflation rose more than expected given the “longer and bumpy journey” to the Fed’s target

Wholesale prices rose more than expected in November, adding to a string of sticky inflation data.

Thursday’s report from the Bureau of Labor Statistics showed that the producer price index (PPI), which measures price changes observed by businesses, rose 3% from a year ago, up from 2.4% in October and above that of economists forecast increase of 2.6%. This was the highest year-on-year increase since February 2023. On a monthly basis, prices rose 0.4%, compared to 0.2% in October.

Excluding food and energy, “core” prices rose 3.4% year-on-year, surpassing the 3.1% rise in October. Economists had expected an increase of 3.2%. Meanwhile, core prices rose 0.2% month-on-month, in line with last month’s increase and economists’ forecasts.

“The producer price index (PPI) isn’t so scary once you get past the headline,” national financial market economist Oren Klachkin said of today’s November producer price index report. “While the underlying data quells fears of a new rise in inflation, it does not suggest a rapid decline to 2%. Producer prices and the broader inflation complex are on a long and bumpy road to the Fed’s goal.”

Thursday’s PPI reading comes a day after the release of the November consumer price index, which showed core inflation rose 3.3% for the fourth straight month. However, consumer price readings were largely in line with expectations and did little to shake investor confidence that the Federal Reserve will cut interest rates at its meeting next week.

The stickiness of the CPI reading “is a little concerning,” Paul Ashworth, chief North America economist at Capital Economics, wrote on Wednesday. “But we don’t think it will convince the Fed to skip another 25 basis point rate cut at next week’s FOMC meeting.”

Still, a combination of data over the past few months has shown that inflation is not falling quickly toward the Fed’s 2 percent target. This has led investors to expect fewer interest rate cuts from the Fed in 2025 than initially hoped.

“The Federal Reserve can be largely pleased with the progress made in reducing high inflation rates in recent years,” Rick Rieder, global CIO of fixed income at BlackRock, wrote in a note on Wednesday. “But most of that progress is now behind us and inflation could remain stubbornly near current levels for some time.”

Read more: What the Fed’s interest rate cut means for bank accounts, CDs, loans and credit cards

Josh Schafer is a reporter for Yahoo Finance. Follow him on X @_joshschafer.

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