Wholesale Prices Rise in October – Fed Rate Cut Still Expected in December

Wholesale prices edged up in October, aligning closely with market expectations and suggesting that the Federal Reserve remains on track for a potential interest rate cut in December. According to data released by the Bureau of Labor Statistics on Thursday, the producer price index (PPI)—a measure of prices producers receive for their goods and services—saw a seasonally adjusted increase of 0.2% from the previous month, meeting the consensus forecast from Dow Jones. On a year-over-year basis, headline wholesale inflation reached 2.4%.

Core PPI, which strips out the more volatile food and energy components, rose by 0.3%, a slight uptick from September, and matched analyst predictions. This pushed the 12-month core PPI rate to 3.1%.

Despite these figures still sitting above the Federal Reserve’s 2% inflation target, the data indicates that inflationary pressures are gradually easing, influenced mainly by select sectors rather than widespread price hikes. The services sector was the main driver of October’s increase, posting a 0.3% rise, buoyed significantly by a 3.6% jump in portfolio management fees. Meanwhile, food prices dipped by 0.2%, and energy costs decreased by 0.3%. The price of goods ticked up by only 0.1%, reversing a downward trend seen over the last two months.

Market reactions were muted, with stock futures signaling a mixed opening and Treasury yields holding firm. Investors largely maintain expectations for a third rate cut by the Fed in December, following previous reductions in September and November. According to the CME Group’s FedWatch tool, the likelihood of a December cut stood at 76.1% after the PPI data release, pointing to a strong probability of further easing.

In parallel, labor market data also showed signs of stability. The Labor Department reported initial jobless claims for the week ending November 9 at 217,000—4,000 fewer than the previous week and slightly below the anticipated 220,000. Continuing claims, reflecting those still receiving unemployment benefits, decreased to 1.873 million, a decline of 11,000 from the prior week.