The US Producer Price Index (PPI) rose less than expected in December, a positive sign for the economy amid recent market concerns that inflation is not declining fast enough toward the Federal Reserve’s 2% target.
A report released Tuesday by the Bureau of Labor Statistics showed that the PPI, which tracks price changes experienced by businesses, rose by 3.3% year-over-year, up from November’s 3% but below the 3.5% increase economists had forecast. On a monthly basis, prices rose by 0.2%, falling short of the 0.4% increase economists had anticipated.
Excluding food and energy, “core” prices increased by 3.5% year-over-year, slightly higher than November’s 3.4% rise but below the 3.8% expected by economists. On a monthly basis, core prices remained flat, contrasting with economists' expectations of a 0.3% increase and last month's 0.2% rise.
The PPI reading on Thursday precedes the highly anticipated December Consumer Price Index (CPI) release. Economists expect minimal progress, forecasting core inflation to remain steady at 3.3% year-over-year for the fifth consecutive month.
Economists believe that signs of slowing inflation in the coming months will be necessary for the Federal Reserve to cut interest rates further this year.
As of Tuesday morning, markets anticipated only a 3% likelihood of the Federal Reserve cutting interest rates at its January meeting, according to the Fed Rate Monitor Tool by Investing Saudi. Markets do not foresee a greater than 50% chance of a rate cut before June at the earliest.
Gold and Dollar Movements
- Gold Futures: Up by 0.04%, trading at $2,679 per ounce.
- Spot Gold: Down by approximately 0.18%, trading at $2,668 per ounce.
- US Dollar Index Futures: Down by around 0.4%, reaching 109.38 points.
