Wholesale inflation cools more than expected in December
Inflation at the wholesale level continued to ease in December
Fed likely to hold tight with its hawkish inflation policy, analyst says
Wells Fargo Advisors SVP Mark Smith and Osaic chief market strategist Phil Blancato analyze December inflation data and discuss how investors should play the bond market on 'Making Money.'
Inflation at the wholesale level moderated more than expected in December, providing evidence that price pressures within the U.S. economy are continuing to gradually fade.
The Labor Department said Friday that its producer price index, which measures inflation at the wholesale level before it reaches consumers, fell 0.1% in December from the previous month. On an annual basis, prices remain up 1% – up slightly from the 0.8% recorded in November.
Those figures are both lower than the 0.1% monthly gain and the 1.3% annual figure predicted by Refinitiv economists.
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In another sign that suggests high inflation is dissipating, core prices – which exclude the more volatile measurements of food and energy – were also unchanged for the month, lower than the 0.2% estimate. The figure was up 1.8% on a 12-month basis, down from 2.2% the previous month.
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The data comes a day after the Labor Department reported that the consumer price index, which measures the prices paid directly by consumers, rose 0.3% in December, above expectations.
A customer visits a supermarket in San Mateo, California, on Dec. 12, 2023. (Photo by Li Jianguo/Xinhua via Getty Images / Getty Images)
The back-to-back inflation reports will have major implications for the Federal Reserve, which has raised interest rates at the fastest pace in decades as it tries to cool the economy. The central bank approved 11 rate hikes in the span of just 16 months, lifting the federal funds rate to the highest level since 2001.
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Central bank officials have suggested in recent weeks that rate hikes are over – and that they will soon pivot to cutting rates. However, policymakers have offered little guidance on when they may begin to reduce rates.
Despite the hotter-than-expected CPI report, a majority of investors are pricing in a quarter-point reduction as early as March, according to the CME Group's FedWatch tool, which tracks trading.