U.S. producer prices recorded only limited increases in recent months, but a firmer rise in underlying measures has added to uncertainty around the Federal Reserve’s policy path.
On a month-on-month basis, producer price inflation slowed sharply in October and remained restrained in November. The Labor Department’s Bureau of Labor Statistics said the producer price index (PPI) for final demand rose 0.1% in October, after a revised 0.6% increase in September. Data released at the same time showed prices advanced by 0.2% in November.
On an annual basis, producer prices were up 3.0% in the 12 months through November, accelerating from a 2.8% year-on-year rise in October.
However, underlying inflation pressures appeared more pronounced. The closely watched “core” PPI, which excludes volatile food and energy components, surged 0.7% in October and increased a further 0.2% in November on a monthly basis. Over the 12 months to November, prices for final demand excluding food, energy and trade services climbed 3.5%, the fastest pace since March.
The producer price figures followed a softer-than-expected U.S. consumer inflation report released on Tuesday. Core consumer prices rose 0.2% in December and 2.6% from a year earlier, undershooting forecasts and reinforcing expectations for future interest rate cuts.
Markets have been pricing in roughly two rate reductions in 2026.
“Two Fed rate cuts seem perfectly achievable with the risks skewed towards a third due to the cooling jobs story,” ING analysts said in a recent note.
The Federal Reserve cut interest rates at each of its final three meetings of 2025, but policymakers have indicated that further easing may be harder to deliver, pointing to the likelihood of only one additional cut in 2026.