Wholesale prices in October saw a slight increase, aligning with expectations and reflecting the Federal Reserve’s potential interest rate cut in December, as per the Bureau of Labor Statistics report on Thursday. The producer price index, indicating what producers receive for their goods, rose by 0.2% for the month, a slight increase from September but in line with the Dow Jones consensus forecast. Annual wholesale inflation stood at 2.4%.
Excluding food and energy, core PPI increased by 0.3%, matching expectations and showing a 12-month rate of 3.1%. Despite exceeding the Fed’s 2% inflation target, the data suggests that price hikes are stabilizing, driven by specific factors.
Service prices rose by 0.3% in the month, primarily due to a 3.6% surge in portfolio management costs. Food prices decreased by 0.2%, while energy prices dropped by 0.3%. Goods prices rose by 0.1% after declining in the previous two months. Market response was muted, with stock futures indicating a mixed opening and Treasury yields remaining higher.
Traders anticipate the Fed to implement another quarter percentage point rate cut at the December 17-18 meeting, following cuts in September and November. Market expectations suggest the Fed may pause in January and proceed with a slower easing pace through 2025. The likelihood of a December rate cut decreased slightly to 76.1% after the report, still indicating a high probability according to the CME Group’s FedWatch gauge.
In other economic news on Thursday, the Labor Department noted a moderation in layoff rates after a brief increase. Initial claims for unemployment benefits totaled 217,000 for the week ending November 9, down by 4,000 from the previous period and slightly below the 220,000 estimate. Continuing claims, reported a week later, totaled 1.873 million, showing a decrease of 11,000 from the prior week.
