Wholesale prices nudged higher in October, though largely in line with expectations and mostly consistent with the Federal Reserve cutting interest rates again in December, the Bureau of Labor Statistics reported Thursday.
The producer price index, which measures what producers get for their products, increased a seasonally adjusted 0.2% for the month, up one-tenth of a percentage point from September though matching the Dow Jones consensus forecast. On a 12-month basis, headline wholesale inflation was at 2.4%.
Excluding food and energy, core PPI rose 0.3%, also one-tenth more than September and also matching expectations. The 12-month rate was at 3.1%.
Though the readings are above the Fed’s 2% inflation goal, the trend is showing that price increases are generally moderating and inflation is being pushed by isolated factors.
Services rose 0.3% on the month, accounting for most of the PPI increase, and was driven largely by a 3.6% surge in portfolio management prices. Food prices fell 0.2% on the month while energy was off by 0.3%. Goods prices nudged higher by 0.1% after falling the previous two months.
Markets reacted little to the news, with stock futures pointing to a mixed open while Treasury yields held higher.
Traders expect the Fed to follow up rate cuts in September and November with another quarter percentage point reduction at the Dec. 17-18 meeting. After that, market pricing points to the Fed skipping January and moving at a slower easing pace through 2025.
The market-implied probability for a December rate cut nudged down to 76.1% following the release, an area that still indicates a strong likelihood, according to the CME Group’s FedWatch gauge of futures prices.
In other economic news Thursday, the Labor Department reported that the pace of layoffs continued to moderate after a brief spike.
Initial filings for unemployment benefits totaled 217,000 for the week ended Nov. 9, down 4,000 from the previous period and slightly lower than the 220,000 estimate.
Continuing claims, which run a week behind, totaled 1.873 million, down 11,000 from the prior week.
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