U.S. Producer Prices Rise Moderately in December, Fed Rate Cuts Unlikely Before Second Half of 2024
U.S. producer prices increased moderately in December, according to the Labor Department’s Bureau of Labor Statistics. The producer price index for final demand rose 0.2% last month, following an unrevised 0.4% advance in November. Economists had forecast a 0.3% increase.
The 12-month rate of producer price inflation accelerated to 3.3% in December, up from 3.0% in November. The surge in the year-on-year rate reflected last year’s lower prices, especially for energy products, dropping out of the calculation.
The report comes as the Federal Reserve is expected to keep interest rates unchanged through June, amid labor market resilience. At least one Wall Street institution, Bank of America Securities, now believes the Fed’s easing cycle is over. Goldman Sachs has revised down its expectations for rate cuts this year, now expecting two cuts in June and December.
The central bank kicked off its easing cycle in September and has lowered its benchmark overnight interest rate by 100 basis points to the current 4.50%-4.75% range. The last reduction was in December, when policymakers also projected two rate cuts this year instead of the four they had forecast in September.
Fears are escalating that pledges by President-elect Donald Trump to impose or massively raise tariffs on imports and deport millions of undocumented immigrants could stoke inflation. This was evident in the spike in consumers’ inflation expectations in January.
