Wholesale prices, which are considered a leading indicator of U.S. consumer prices, fell last month, defying market expectations. This is the opposite trend of consumer prices, which poured cold water on expectations of an interest rate cut that was engulfing Wall Street.

The U.S. Department of Labor announced on the 12th that the producer price index (PPI) in December fell 0.1% from the previous month. The market forecast compiled by Dow Jones was for a rise of 0.1-0.2%. Following -0.4% in October and -0.1% in November, it continued to decline for three consecutive months until this month.

Core PPI, excluding highly volatile foodstuffs and energy, rose 0.2% from the previous month, meeting Wall Street predictions.

Compared to the same month last year, PPI in December rose 1.0%. It also fell short of market expectations (1.3-1.4% rise). However, the increase has slightly expanded compared to the previous month (0.8% increase). The increase in core PPI compared to the same month last year was 1.8%, which was below the market consensus (average forecast, 1.9%).

Wholesale prices are at odds with U.S. consumer prices...  Interest rate cut expectations ‘rebound’

This is another sign that inflation is easing. The annual increase rate of the US PPI reached 6.4% in 2022, but last year it was only 1%.

This is in contrast to the December consumer price index (CPI) recorded 3.4% (compared to the same month last year) the previous day, which exceeded market expectations. Immediately after the PPI announcement, stock futures rose and government bond yields fell.

CNBC said, “If there is any sign of easing inflation, the interest rate cut in March could be strengthened even if prices exceed the U.S. Central Bank’s (Fed) target (2%).” According to the Chicago Mercantile Exchange (CME) FedWatch, the probability that the Fed will lower interest rates by 0.25 percentage points at the Federal Open Market Committee (FOMC) on March 19-20 has increased to 75.1%.

Reporter Jang Seo-woo [email protected]