US wholesale prices rose by less than anticipated but remained elevated in October, keeping a rate hike on the table for the Federal Reserve’s December meeting. The producer price index for final demand—which measures changes in the prices of goods and services produced in the US—climbed 0.3% last month after a revised 1.3% rise in September, the Bureau of Labor Statistics said this morning, reflecting an easing in energy costs, and coming in slightly below the 0.4% advance expected by economists. In the 12 months through October, the headline index advanced 6.5% up from 6.3% in the prior month, marking the fastest pace recorded since the post-pandemic inflationary rebound, while a measure excluding food and energy rose 5%.
The release took on added significance after tightening expectations ratcheted sharply higher this week, driving the dollar to its strongest levels since last year’s ‘Liberation Day’ tariff debacle. On Tuesday, Fed governor Christopher Waller warned he might vote for a jumbo-sized rate increase at next month’s meeting if monthly core inflation came in at or above 0.3% in October — shortly before a report showing exactly that. Yesterday, President Trump doubled down on his inflationary playbook, threatening a twofold increase in trade levies on Mexico and directing Vice-President JD Vance to hold off on negotiations with Iran, sending oil prices higher. Futures markets now have a December hike fully priced in and see a total of three by next September, up from the single move expected just a week ago.
The dollar is almost unchanged, Treasury yields are slipping incrementally across the policy-sensitive end of the curve, and equity futures are climbing as tightening expectations for the year ahead edge slightly lower. A substantial rebound in Nvidia’s share price is adding to stock market momentum as traders reassess the company’s fundamentals in the wake of Jensen Huang’s resignation late yesterday.
As previously noted, persistently-wide rate differentials look likely to keep the dollar supported until the end of the year, but further gains could be hard-won. The currency looks overbought against the euro, pound, yen, and Canadian dollar on a technical basis, and is vulnerable to an eventual reset in expectations as oil- and tariff-led inflationary pressures come off the boil in early 2027, as outperformance in American equities ebbs, and as other economies find a firmer footing.