December PPI Report

You thought it was over, didn't you? You thought the inflation talks were done. Well, you guessed WRONG.

Inflation talks have only begun, with inflation topped and all these different inflation data points finally falling.

With inflation finally falling, everyone expects the FED and Jerome Powell to pivot.

Let me make something straight. Inflation is still between 7 and 8 percent. They cannot pivot because prices have astronomically risen in the past months.

What is PPI?

The Bureau of Labor Statistics (BLS released the Producer Price Index (PPI) for the United States); the PPI measures the average change in prices received by domestic producers for their goods and services and is used to track inflation and economic growth.

The Producer Price Index (PPI) is an important economic indicator because it provides insight into inflation and economic growth. Changes in the PPI can signal shifts in the supply and demand for goods and services and provide an early warning of potential changes in consumer prices. This information is helpful for businesses, investors, and policymakers who use it to make pricing, production, and investment decisions.

Additionally, this month's PPI is much more important because it precedes this month's Consumer Price Index (CPI); this will indirectly influence the following CPI report.

The PPI report was just released. It showed that inflation has risen on a month-to-month basis. The PPI for this month came in at 0.3%, while the forecast was 0.2%; this may lead to a change in their interest rate positioning. The Y-o-Y PPI forecast is 7.2% but came in at 7.4% and is down from 8.0% in November.

The report provides early evidence that the Fed’s rising interest rates campaign hasn't met their expectations. The FED has lifted interest rates from near zero to nearly 4 percent this year as it tries to slow consumer and business demand and give supply a chance to catch up.

At the next FOMC meeting, we expect the FED to raise interest rates by 50bps. (don't get confused with pivoting, they are simply slowing rate hikes down). But with this new PPI report and next week's CPI report, we never know what the FED will decide. There is always the possibility that they raise 75bps.

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