The Balance Today: News You Need To Know on Dec. 9, 2022

Rising Wholesale Prices Add To Uncertainty Over Fed Action

Women looking at clothes in a store
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Thomas Barwick / Getty Images

This morning we got a first look at November’s inflation figures and unfortunately, they didn’t ease as much as expected. The Producer Price Index (PPI), or wholesale inflation, rose slightly more than expected by 0.3% last month from the month prior. November PPI sits 7.4% higher compared to the same time last year but is lower than the year-over-year number for October that clocked 8.1%. The core rate, which excludes more volatile food and energy prices, was also 0.3% higher for the month and up 4.9% year-over-year, although slowing from a rate of 5.4% in October.

While today’s PPI reading is not necessarily an indicator of what we can expect next week when the Consumer Price Index (CPI) is released, it does suggest that inflation isn’t slowing nearly as quickly as economists anticipated, and that the Federal Reserve’s rate hikes aren’t making as much headway as we’d hope. 

This could mean that the Fed could get more aggressive in its policy meeting next week and decide to hike rates by 75 basis points (bps), instead of a more moderate 50 bps. Remember, Fed Chairman Jerome Powell indicated in a November speech that the Fed could slow its pace of rate hikes as early as December. But with these numbers, it’s hard to predict which way it’ll move. The markets still believe, with a 77% likelihood, that the central bank will hand us a more moderate rate hike, but that prediction has dipped slightly from where it was just a few days ago. 

What’s more, rising prices for wholesalers could impact shoppers like you and me as stores pass on those higher costs to us. As a leading indicator, today’s PPI reading could mean that we will continue to pay more for items in stores, which might change shopping habits—something that big retailers don’t want us to do.

Stocks wavered between losses and gains after the inflation reading was released this morning, as investors remain nervous about the possibility of aggressive rate hikes that might tip the economy into a recession.

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Sources
The Balance uses only high-quality sources, including peer-reviewed studies, to support the facts within our articles. Read our editorial process to learn more about how we fact-check and keep our content accurate, reliable, and trustworthy.
  1. Bureau of Labor Statistics. "Producer Price Index News Release summary."

  2. Board of Governors of the Federal Reserve System. "Inflation and the Labor Market."

  3. CME Group. "CME FedWatch Tool."

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