Wholesale prices rose 0.4% in August, as expected

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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 final demand costs for goods and services, increased a seasonally adjusted 0.4% for the month, in line with the Dow Jones consensus, the Bureau of Labor Statistics reported.
On an annual basis, that put the PPI at 5.4%, still well above the Fed'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 by 0.2%, against the forecast for a 0.3% increase. Core less trade services, another volatile category, was up 0.3%, in line with estimates.
Stock market futures were negative following the report, the release of which coincided with U.S. crude oil prices topping $100 a barrel. Treasury yields moved sharply higher, with the 10-year note hitting its highest since November 2023.
"Net, net, today's PPI inflation report does nothing to turn down the warnings about the inflation threats the economy faces, especially if you are an inflation hawk with an itchy trigger finger at the Federal Reserve," wrote Chris Rupkey, chief economist at Fwdbonds.
Energy prices in particular and goods prices overall were responsible for most of the PPI increase. Final demand energy prices rose 4.2%, pushed largely by soaring diesel, which surged 24.1%. Goods prices broadly increased 1.1%.
Services prices were up just 0.1%, with a 2.3% increase in transportation and warehousing accounting for much of that move.
Portfolio management costs, a closely watched metric in the PPI calculations, fell 1.6% for the month but were still up 18.8% from a year ago.
There were further signs of pipeline pressures: Processed goods prices increased 1.8% while unprocessed goods accelerated 1.1%.
The report comes less than a week before central bankers will release their decision on interest rates.
A separate report, the consumer price index, will be out Friday. CPI is expected to show a headline annual inflation rate of 3.4%, though core is expected at 2.4%. Both BLS measures feed into the Fed's primary inflation gauge, the personal consumption expenditures price index, though that will not be released until later in the month, and after next week's policy meeting.
After being on hold throughout 2026, the Fed is expected to approve a quarter percentage point hike of its benchmark interest rate, though market pricing has been volatile. Traders slightly increased their bets on a rate increase following the PPI release, putting the odds close to 66%, according to the CME Group's FedWatch gauge of futures prices.
Public statements from Fed officials have been split.
Chairman Kevin Warsh recently emphasized his commitment to getting inflation back to target and said action may be needed. Others, though, have advocated for a more patient approach and said policymakers should continue to watch the data for signs on how things are trending.
Much of this year's persistent inflation has been attributed to the lingering impact from tariffs as well as the war in the Middle East.

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