Stocks fell while Treasury yields rose on Friday morning after the Labor Department reported that wholesale prices increased more than expected in November. The producer price index, which measures what companies get for their products in the pipeline, went up 0.3% for the month and 7.4% from a year ago, the slowest 12-month pace since May 2021. Economists surveyed by Dow Jones had been anticipating a 0.2% gain.
Excluding food and energy, core PPI was up 0.4%, also above an estimate of 0.2%. Core PPI was up 6.2% from a year ago, compared to 6.6% in October.
“The monthly increase in producer prices illustrates the need for continued tightening, albeit at a slower pace,” Jeffrey Roach, chief economist at LPL Financial, told CNBC. “The inflation pipeline is clearing and consumer prices will slowly move closer to the Fed’s long run target.”
The Fed has implemented four consecutive rate hikes of 75 basis points. This new data makes it likely that the U.S. central bank will raise rates yet again, though most analysts expect it to be a rate hike of 0.5%. This would push benchmark borrowing rates to a target range of 4.25%–4.5%. Fed members have been raising interest rates to curb persistently high inflation.
The more closely watched consumer price index, a key inflation indicator, is due out Tuesday. The next day, the Federal Reserve will conclude its meeting with an announcement on what it will do with interest rates.
With inflation still going strong and the Fed expected to continue raising interest rates, investors are expecting more volatility, with some thinking that the central bank’s actions will push the economy into recession. That’s where active management can help.
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