U.S. wholesale prices rose in August, according to a report Thursday that could play a key role in the Federal Reserve’s upcoming interest rate decision. The producer price index, a measure of the costs of final demand for goods and services, rose a seasonally adjusted 0.4% for the month, in line with the Dow Jones consensus, the Bureau of Labor Statistics reported. On an annualized basis, that put the PPI at 5.4%, still well above the Federal Reserve’s 2% inflation target and 0.1 percentage point higher than expected. The PPI rose 0.1% in July, a slight upward revision from the original estimate of no change. Excluding food and energy, the core PPI accelerated 0.2%, compared to the forecast for a 0.3% increase. Less commercial basic services, another volatile category, rose 0.3%, in line with estimates. Stock market futures were negative following the report, the release of which coincided with US crude oil prices surpassing $100 a barrel. Treasury yields rose sharply, with the 10-year bond hitting its highest level since November 2023. “Net, net, today’s PPI inflation report does nothing to dismiss warnings about the inflation threats facing the economy, especially if you are an inflation hawk with one finger on the Fed’s trigger,” wrote Chris Rupkey, chief economist at Fwdbonds. Energy prices in particular and goods prices in general were responsible for most of the PPI increase. Final demand energy prices rose 4.2%, driven largely by the rise of diesel, which rose 24.1%. Prices of goods overall increased by 1.1%. Prices for services rose just 0.1%, and a 2.3% increase in transportation and storage accounted for much of that movement. Portfolio management costs, a closely watched metric in PPI calculations, fell 1.6% for the month but still rose 18.8% from a year ago. There were further signs of channel pressures: prices for processed goods increased by 1.8%, while unprocessed goods accelerated by 1.1%. The report comes less than a week before central bankers release their interest rate decision. A separate report, the consumer price index, will be released on Friday. The CPI is expected to show a headline annual inflation rate of 3.4%, although core inflation is expected to be 2.4%. Both BLS measures feed into the Federal Reserve’s primary gauge of inflation, the personal consumption expenditures price index, although it won’t be released until the end of the month and after next week’s policy meeting. After remaining on hold throughout 2026, the Federal Reserve is expected to approve a quarter-percentage point increase in its benchmark interest rate, although market prices have been volatile. Traders slightly increased their bets on a rate hike following the PPI release, putting the odds near 66%, according to the CME Group’s FedWatch Futures Price Gauge. Public statements from Fed officials have been divided. President Kevin Warsh recently emphasized his commitment to getting inflation back on target and said action may be necessary. Others, however, have advocated a more patient approach and said authorities should continue to watch the data for signs about how things are going. Much of this year’s persistent inflation has been attributed to the lingering impact of tariffs, as well as the war in the Middle East.
