US producer prices rose slightly in December.
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US producer prices rose slightly in December, but this is unlikely to change the view that the Federal Reserve will not cut interest rates again before the second half of the year amid a resilient labor market.
After an unrevised 0.4% increase in November, the final consumer price index rose 0.2% from the previous month, the Labor Department’s Bureau of Labor Statistics said on Tuesday. Economists polled by Reuters had forecast PPI rising 0.3 percent.
In the 12 months to December, PPI rose 3.3% after rising 3.0% in November. The year-on-year price increase reflects last year’s low prices, especially for energy products.
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A customer shops at a grocery store in Chicago, Illinois. (Scott Olsen/Getty Images/Getty Images)
The report last week followed a sharp increase in December nonfarm payrolls and a drop in the unemployment rate, prompting economists to expect the U.S. central bank to keep inflation unchanged through June.
The US economy added 256,000 jobs in December, more than expected
June 15, 2023 Workers build homes in Lillington, North Carolina. (Photographer: Alison Joyce/Bloomberg via Getty Images/Getty Images)
At least one Wall Street institution, Bank of America Securities, now believes the Fed’s easing cycle is over. Goldman Sachs now expects two cuts in June and December this year, down from three previously.
The central bank began its easing cycle in September, cutting the overnight interest rate by 100 basis points from the current range of 4.50%-4.75%.
Federal Reserve Chairman Jerome Powell speaks at a news conference following the Federal Open Market Committee (FOMC) meeting Thursday, Nov. 7, 2024, in Washington, DC. (Ting Shen/Bloomberg via Getty Images/Getty Images)
The last cut was in December, with policymakers estimating two rate cuts this year instead of the four they forecast in September.
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The policy rate was raised by 5.25 percentage points in 2022 and 2023 to tackle inflation. President-elect Donald Trump’s pledge to impose or significantly increase tariffs on imports and millions of undocumented immigrants could fuel inflation, fears are mounting. This was reflected in the increase in consumer price inflation in January.
