• U.S. wholesale inflation increased by 0.2% in December, driven by higher energy costs.
• Producer prices are up 3.3% year-over-year, marking the largest rise since February 2023.
• Core wholesale inflation, excluding food and energy, remained steady at 3.5% year-over-year.
• Financial markets reacted positively, with gains across major indices in early trading.
• Federal Reserve officials may remain cautious about future rate cuts amid ongoing economic uncertainty.

The U.S. producer price index (PPI) showed a 0.2% increase in December, reflecting a rise fueled by higher energy costs as reported by the Labor Department. This increase marks a slowdown from a 0.4% rise the previous month, offering a mixed outlook for inflation trends. Year-over-year, the PPI is up 3.3%, the highest since February 2023 and a slight escalation from a 3.0% gain in November. A significant contributor to the overall increase was a 3.5% rise in energy prices, especially a 9.7% surge in gasoline costs, while food prices saw a marginal 0.1% decrease (Reuters).

The data has prompted financial markets to react positively; the S&P 500, for instance, rose by 0.4% in early trading following the report. Following a week of strong job growth and steady unemployment rates, expectations for the Federal Reserve's monetary policy have shifted. Economists largely believe the Fed will maintain interest rates for the time being, with potential cuts projected for later in the year (CBS News).

Core wholesale inflation, which excludes food and energy, remained flat in December but was still elevated at 3.5% year-over-year. This aligns with the Fed’s target of keeping inflation in check as they navigate economic pressures, including incoming tariffs and other policy measures from President-elect Donald Trump's administration. According to economists at High Frequency Economics, the current inflation data does not suggest a pressing need for rate reductions, as their focus remains on prevailing economic conditions (Reuters).

This producer price report, along with upcoming consumer price data, will be critical in shaping monetary policy as the Fed continues to seek a balance between growth and inflation.
For further details, view the complete reports on AP News, Reuters, and CBS News.