US November PPI unexpectedly rises, supporting the Fed's decision to "stay put".

According to data from the US Bureau of Labor Statistics, the US PPI year-on-year in November was 3%, higher than the expected 2.7%; PPI month-on-month was 0.2%, in line with expectations. The US core PPI year-on-year in November, excluding food and energy, was 3%, as expected 2.7%; core PPI month-on-month was 0%, in line with expectations. Wholesale inflation in the US increased slightly in November, driven mainly by rising energy costs while service prices remained unchanged. The report includes the first estimate data for wholesale prices in October, which was delayed due to the 43-day federal government shutdown. A report released earlier on Tuesday showed that core CPI in December was lower than expected, indicating a cooling trend in prices. The latest PPI data further shows that businesses are still relatively restrained in passing higher import tariffs and other costs on to consumers, fearing that excessive price hikes will suppress sales. The final demand goods index in November rose by 0.9%, the largest increase since February 2024 when it rose by 0.9%. Over 80% of the increase in November can be attributed to a rise in final demand energy prices, which rose by 4.6%. Excluding food and energy, the final demand goods index rose by 0.2%, while the price of final demand food remained unchanged. More than half of the increase in the final demand goods index in November was due to a rise in gasoline prices, which increased by 10.5%. Economists and investors closely monitor the PPI because several of its components make up the Federal Reserve's preferred inflation gauge - the Personal Consumption Expenditure Price Index. In these categories, portfolio management fees increased by 1.4%, while airline passenger service costs decreased by 2.6%. Hospital diagnostic and treatment fees slightly increased, with outpatient treatment fees seeing a larger increase. After rising by 0.3% in October, service costs remained steady in November. An indicator measuring profit margins declined by 0.8% in October and November. Excluding food, energy, and trade services, the less volatile PPI rose by 0.2%. The US government will release November Personal Consumption Expenditure (PCE) price data, as well as income and spending data on January 22. In the coming week, Federal Reserve officials will hold their first policy meeting of 2026. After three consecutive rate cuts, it is expected that Fed officials will keep rates unchanged, while waiting for further inflation progress and assessing developments in the job market. Following the data release, the market generally expects the Fed to cut rates twice this year, with the first rate cut likely in June, with a probability of around 47.8%.