Wholesale prices rose 0.2% in October, in line with expectations

Wholesale prices rose slightly in October, although largely in line with expectations and largely consistent with the Federal Reserve cutting interest rates again in December, the Bureau of Labor Statistics reported Thursday.

The producer price index, which measures what producers get for their products, rose a seasonally adjusted 0.2% for the month, a tenth of a percentage point higher than in September, although it matched the Dow Jones consensus forecast. On a trailing 12-month basis, headline wholesale inflation was 2.4%.

Excluding food and energy, the core PPI rose 0.3%, also one tenth more than in September and also matching expectations. The 12-month rate stood at 3.1%.

Although the readings are above the Federal Reserve’s 2% inflation target, the trend shows that overall price increases are moderating and that inflation is being driven by isolated factors.

Services rose 0.3% for the month, accounting for most of the PPI increase, and were largely driven by a 3.6% increase in portfolio management prices. Food prices fell 0.2% month-on-month, while energy fell 0.3%. Goods prices rose 0.1% after falling the previous two months.

Markets reacted little to the news, with stock futures pointing to a mixed open while Treasury yields remained higher.

Traders expect the Fed to follow rate cuts in September and November with another quarter-percentage-point reduction at the Dec. 17-18 meeting. After that, market prices point to the Fed skipping January and moving at a slower pace of easing through 2025.

The market-implied probability of a December rate cut fell to 76.1% following the release, an area that still indicates a strong probability, according to the CME Group’s FedWatch Futures Price Gauge.

In other economic news Thursday, the Labor Department reported that the pace of layoffs continued to moderate after a brief increase.

Initial claims for unemployment benefits totaled 217,000 for the week ending Nov. 9, down 4,000 from the prior period and slightly below the estimate of 220,000.

Continuing applications, which are a week late, totaled 1.873 million, 11,000 less than the previous week.