Although wholesale price increases were weaker than expected in October, inflationary pressures remain and the Federal Reserve is still likely to meet its near-term interest rate hike target.
The producer price index, which measures the price domestic producers get for their products before they reach consumers, rose a seasonally adjusted 0.3% for the month, compared with the Dow Jones consensus for a 0.4% rise, the Bureau of Labor Statistics said Friday.
Core PPI, which excludes food and energy, rose 0.3%, meeting expectations.
On an annual basis, headline PPI accelerated by 6.5%, rising 0.2 points, the highest annual rate since November 2022.
The report was released just weeks before the Federal Reserve’s next policy meeting on December 8-9. Markets have fully priced in the central bank’s quarter-point hike in its key overnight borrowing rate, with a slim chance that the Federal Open Market Committee will choose to raise it by half a percentage point.
Stock market futures rose further following the announcement, but U.S. Treasury yields were mixed.
Earlier this week, the BLS reported that inflation at the register was higher than expected.
The composite consumer price index rose 0.4% in October, and the core index rose 0.3%, both 0.1 points higher than expected. Due to the government shutdown in October 2025, the BLS was unable to collect some data and refrained from releasing 12-month inflation rates for the CPI.
But the numbers showed the Fed is still a long way from its 2% inflation target.
“While today’s PPI numbers show signs of improvement, although they are still too high, the Fed’s approach is unlikely to change in December because the CPI numbers were already outside the comfort zone,” said Chris Zaccarelli, chief investment officer at Northlight Asset Management.
Additionally, policymakers are beginning to worry that inflation caused by the Iran war, soaring fuel prices and President Donald Trump’s tariffs is beginning to spread throughout the economy. The Fed typically views such price pressures as temporary, but the breadth of inflation could indicate that it is more entrenched.
“For months in a row now, we’re seeing signs of trouble,” Chicago Fed President Austan Goolsby said in a CNBC interview on Friday. “If you look at the broader picture of inflation, it’s not just that it’s above target and has been for some time; it’s that in categories that aren’t driven by oil prices or tariffs, progress is still stalling, and in some cases moving in the wrong direction.”
PPI, which excludes food, energy and trade services, rose 0.5% in October.
Commodity prices rose 0.5% in October, but more than 60% of that came from goods excluding food and energy, which actually fell 0.1%. On an annualized basis, the goods index rose 10.2%, the largest increase in 12 months since October 2022.
Final demand service prices rose 0.2%, most of which related to transportation and warehousing services, with freight trucking rising 3.9% within that category.
“We’ve been above 2% for almost six years, and at times we’ve made progress, but recently we haven’t made any progress at all and if anything, we’re moving in the wrong direction,” Goldsby said. “Inflation is rising. It’s proving to be more persistent than we initially expected from the supply shock.”
Other items in the PPI report also showed multi-year increases. Prices of semi-processed products rose 14.6% from October 2025, marking the largest annual increase since July 2022. Median prices for services recorded a 6.9% increase, the largest increase since November 2022.
