Wholesale prices rose 0.2% in December, less than expected

A measure of wholesale prices rose less than expected in December, providing a signal that inflation pressures in the pipeline have eased to close the year although they are unlikely to be enough to prompt the Fed to cut interest rates again anytime soon.

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

Excluding food and energy, the core Producer Price Index was flat compared to expectations for a 0.3% rise. Excluding food, energy and trade services, the index rose only 0.1%.

On an annual basis, the headline producer price index rose 3.3% for the full year, far exceeding the 1.1% increase in 2023.

Commodity prices rose by 0.6%, driven by a 9.7% rise in gasoline prices. Upward movements in several food and energy-related measures were offset by a 14.7% decline in fresh and dry vegetable prices.

On the services side, prices remained stable, despite a 7.2% increase in passenger transport, which was offset by a decrease in passenger accommodation prices.

Stock market futures contracts It rose after the report while Treasury yields fell after rising sharply in the first days of 2025.

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

On Wednesday, the BLS will release its most closely watched CPI reading. This is expected to show monthly gains of 0.3% on both headline and core readings and annual inflation rates of 2.9% and 3.3% respectively.

Although the central bank focuses more on the Commerce Department’s Personal Consumption Expenditures Price Index as its main measure of inflation, the Producer Price Index and Consumer Price Index readings factor into this calculation.

Market prices overwhelmingly point to the Fed remaining in a hold mode at its January 28-29 meeting. However, policymakers, and Chairman Jerome Powell in particular, can lay the groundwork for what is to come regarding interest rates.

Federal funds futures pricing on Tuesday indicated only one rate cut during the rest of the year. Economists at Bank of America said Monday they believe the Fed could do that this year. Fed officials at their December meeting expected the equivalent of two cuts this year, assuming quarter-point moves.