By Nicholas Jasinski

Wholesale inflation remained hot in January, a day after data showed consumer prices rose by more than expected to start the year. The Federal Reserve is on hold with interest-rate moves until it has a clearer picture of where inflation is going.

The producer price index increased by 0.4% in January, the Bureau of Labor Statistics said on Thursday morning. That was above economists' 0.2% consensus estimate and compares with a revised increase of 0.5% in December. The PPI was 3.4% higher than a year earlier, versus a 3.5% rise in the year through December.

The core PPI, which excludes food and energy prices, ticked up 0.1% in January, equaling its December move and less than the 0.3% rise expected. The subindex was up 3.6% from a year earlier.

This is breaking news. Read a preview of the producer price index data below and check back for more analysis soon.

More inflation data on Thursday will be the next test for markets and the Federal Reserve. Officials are waiting for progress in slowing inflation, after some recent setbacks.

The Bureau of Labor Statistics will publish the producer price index for January on Thursday at 8:30 a.m. ET. The consensus estimate among economists is a 0.2% rise in the PPI during the month, which would match the increase in December. The year-over-year change is expected to tick down to 3.2%, from 3.3% a month earlier.

After excluding food and energy components, the core PPI is forecast to have increased 0.3% in January. That would compare with no change in December and would be up 3.3% from a year earlier. It would interrupt a five-month streak of accelerating annual increases in the core PPI, which was up 3.5% year-over-year in December.

The consumer price index rose more than expected in January, BLS data showed on Wednesday morning: It was up 0.5% last month, versus the 0.3% forecast. The core CPI added 0.4%, a tenth more than expected. Those were increases of 3% and 3.3%, respectively, from a year earlier.

Bond yields rose and stocks fell on Wednesday following the report. Interest-rate futures markets moved to reduce the odds of rate cuts this year. Pricing on Wednesday afternoon implied the greatest likelihood of a quarter of a percentage point of rate decrease by the end of 2025, then the highest odds of another quarter-point cut in 2026.

The Fed has a 2% annual inflation target, based on yet another measure: the personal consumption expenditures price index. It incorporates elements of both the CPI and PPI. January PCE data will be released on Feb. 28.

Economists tend to pay close attention to several components of the PPI basket which translate to the PCE price index. Those include financial services, airfares, and medical services.

"After tomorrow's PPI figures, I will be able to finalize a January core PCE deflator estimate," wrote Stephen Stanley, chief U.S. economist at Santander U.S. Capital Markets. "However, I would note that in each of the past two years, when the core CPI rose by 0.4%, the core PCE deflator jumped by even more, 0.5% in both years."

The Federal Open Market Committee's next meeting will be on March 18-19, when officials will also have February CPI and PPI reports as well as another month of jobs data.

Write to Nicholas Jasinski at nicholas.jasinski@barrons.com

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February 13, 2025 08:38 ET (13:38 GMT)

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