The December PPI in the United States was lower than expected, but it is difficult to change the expectations of a pause in interest rate cuts.

In December, the annual PPI rate in the United States recorded 3.3%, hitting a new high since February 2023, with market expectations of 3.4% and a previous value of 3%. The monthly PPI rate in December was 0.2%, the lowest since September 2024, with market expectations of 0.3%. The core PPI monthly rate in December was 0%, with an expectation of 0.3% and a previous value of 0.2%. The core PPI annual rate in December was 3.5%, with an expectation of 3.8%, revised from the previous value of 3.4% to 3.5%. The PPI report shows that food prices fell by 0.1%, with vegetable prices dropping by nearly 15%. Energy prices rose by 3.5%. Prices of commodities as a whole have been rising. Crude oil futures reached a five-month high on Monday, while corn futures climbed to a seven-month high. Previously, cocoa and coffee prices had surged at the end of last year. The unexpected cooling of the PPI is attributed to the decrease in food costs and stable service prices, which may help alleviate concerns about persisting price pressures. In recent weeks, amidst strong demand and the threat of higher import tariffs by the incoming Trump administration, investors and consumers have raised their inflation expectations. PPI can provide an initial insight into where CPI might be heading. Economists also pay attention to this index because some of its components, especially healthcare and financial services, can affect the Fed's preferred inflation gauge - the PCE Price Index. These categories showed mixed results in December, with hospital care unchanged, physician services and portfolio management categories slightly increasing. However, airfare prices saw the largest increase since March 2022. Meanwhile, the PPI report indicates that service prices remained unchanged, marking one of the mildest readings of 2024. The lower-than-expected PPI is a positive signal for the economy, as markets have been worried that inflation may not decrease rapidly enough to reach the Fed's target of 2%. On Wednesday, the US will also release CPI data, with economists expecting the core CPI annual rate to remain around 3.3% for the fifth consecutive month. The December PPI data in the United States fell short of expectations, but is unlikely to change the Fed's view that they will not cut interest rates again before the second half of the year, given the strong performance of the job market. The surge in the year-on-year rate reflects last year's price declines, especially as energy prices have been excluded from the calculations. Currently, at least one Wall Street institution (Bank of America) believes that the Fed's easing cycle has ended. Goldman Sachs, on the other hand, predicts two rate cuts in June and December this year, down from the previous three. Following the lower-than-expected PPI data, the yield on the 10-year US Treasury bond fell, dropping by 4.6 basis points to 4.7594%. The US dollar index DXY fell by 30 points in the short term, to 109.44. Futures for the three major US stock indexes rose, with Nasdaq 100 index futures up 0.77%, S&P 500 index futures up 0.56%, and Dow futures up 0.45%.