US Producer Prices Rise More Than Expected in January

INFLATION - WASHINGTON. U.S. producer prices increased more than expected in January amid strong gains in the costs of services, which could amplify worries that inflation was picking up.W

The producer price index for final demand rose 0.3% last month after declining by a revised 0.1% in December, the Labor Department's Bureau of Labor Statistics said on Friday.

Economists polled by Reuters had forecast the PPI rebounding 0.1% following a previously reported 0.2% drop.

In the 12 months through January, the PPI increased 0.9% after climbing 1.0% in December.

Government data this week showed a stronger-than-expected increase in consumer prices in January, fanning fears that inflation was picking up after months of cooling.

Read Also: Oil Slides 1% as Weaker IEA Demand Outlook Offsets Rate Cut Hopes

Some of the components in the CPI and PPI baskets go into the calculation of the personal consumption expenditures (PCE) price indexes, the measures tracked by the Federal Reserve for its 2% inflation target. The PCE inflation data is due to be released at the end of the month.

Financial markets expect the U.S. central bank to deliver its first interest rate cut in the first half of the year, though the timing remains uncertain, with the odds shifting in favor of May from March. Some economists are leaning towards June, citing a still-tight labor market.

Since March 2022, the Fed has raised its policy rate by 525 basis points to the current 5.25%-5.50% range.

The narrower measure of PPI, which strips out food, energy and trade services components, jumped 0.6% in January after gaining 0.2% in the prior month. The so-called core PPI increased 2.6% on a year-on-year basis, the same rate of increase as in December.