U.S. Producer Prices Rise 2.6%, Fed Remains Cautious/ Newslooks/ WASHINGTON/ J. Mansour/ Morning Edition/ U.S. producer prices rose by a modest 2.6% in May, signaling that inflationary pressures remain subdued. Energy and food costs edged up slightly, with egg prices seeing a sharp rebound. Economists expect inflation to rise later in 2025 due to Trump’s new tariffs, but the Federal Reserve is likely to hold rates steady for now.
U.S. Wholesale Inflation Trends – Quick Looks
- Producer Price Index (PPI) rose 2.6% year-over-year in May 2025.
- Month-over-month increase: 0.1%, following a 0.2% decline in April.
- Core PPI (excluding food/energy): Up 0.1% from April, 3% annually.
- Gasoline prices rose 1.6% after falling in April.
- Egg prices rebounded 1.4% in May, still 125% higher than a year ago.
- Food prices rose 0.1% in May after April’s 0.9% drop.
- Energy prices overall remained flat for the month.
- Tariff impact from Trump’s global trade policy has not yet pushed prices higher.
- Fed’s stance: No immediate rate hikes expected; caution remains due to tariff uncertainty.
- Inflation outlook: PPI is an early indicator for consumer inflation and the Fed’s preferred PCE index.
Mild Wholesale Inflation Continues as Fed Watches Tariff Effects – Deep Look
WASHINGTON (AP) — Wholesale prices in the U.S. rose modestly in May, offering further evidence that inflation remains mild even as global trade tensions grow under President Donald Trump’s expanding tariff policies.
According to Thursday’s report from the U.S. Department of Labor, the Producer Price Index (PPI) climbed 2.6% over the past year and 0.1% from April to May. The reading, which tracks prices paid by businesses before reaching consumers, fell just short of economist expectations.
Breakdown of the Report
The core PPI, which excludes the more volatile categories of food and energy, also rose 0.1% for the month and 3% over the past year. These modest gains signal continued disinflation, despite broader concerns that Trump’s sweeping 10% tariffs on global imports may soon spark a rise in consumer costs.
Energy prices remained unchanged overall, although gasoline prices rose 1.6%. Meanwhile, food costs inched up 0.1%, with a particularly notable rebound in egg prices, which surged 1.4% in May after a staggering 39.3% drop in April. Eggs remain 125% more expensive than one year ago, largely due to supply chain disruptions from avian flu.
The Trump Tariff Factor
Despite Trump’s aggressive trade stance — which includes tariffs on steel, aluminum, autos, and virtually all imports — the latest data shows no major inflationary ripple yet. Economists, however, warn this could change.
“We haven’t seen the full pass-through of tariffs to consumer prices yet,” noted Stephen Brown of Capital Economics, adding that some impacts are likely to appear in the second half of the year.
What It Means for the Fed
Wholesale prices are a leading indicator of consumer inflation trends and play a critical role in shaping Federal Reserve policy, especially since some PPI components — like health care and financial services — flow into the Fed’s preferred Personal Consumption Expenditures (PCE) Index.
Following aggressive rate hikes in 2022 and 2023, the Fed cut rates three times last year as inflation cooled. But officials are now taking a wait-and-see approach amid concerns that Trump’s trade actions could reignite price pressures.
“There is no incentive for the Fed to debate hiking rates in today’s figures,” wrote Carl Weinberg, chief economist at High Frequency Economics. “In fact, if the Fed did not know that tariff increases were in the pipeline, it might even contemplate cutting rates.”
The central bank’s next meeting is scheduled for Tuesday and Wednesday, with no rate hike expected.
Economic Outlook
The mild producer inflation trend aligns with recent consumer price data, which showed a 0.1% monthly gain and 2.4% annual increase in the Consumer Price Index (CPI). Both indices reinforce the view that, for now, inflation is well below the heights seen in 2022 when it reached a four-decade peak above 9%.
Nonetheless, economists remain divided. Some believe tariffs may trigger a delayed price surge, especially as businesses begin to pass increased import costs onto consumers in the coming quarters.
The PPI report is also closely monitored because it offers an early look at inflation trends that may influence consumer behavior, wage demands, and corporate profits, key components in shaping both monetary policy and political discourse as the 2028 campaign season slowly ramps up.
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