Transmission lines and electricity infrastructure in Hilliard, Ohio. Credit: Brian Kaiser/Bloomberg.

U.S. wholesale prices rose in January by more than forecast on higher food and energy costs, highlighting that the nation had made only limited progress on inflation ahead of tariffs imposed by the Trump administration.

The producer price index (PPI) for final demand climbed 0.4 percent from a month earlier, following an upwardly revised 0.5 percent increase in December, according to a Bureau of Labor Statistics (BLS) report released today. The median forecast in a Bloomberg survey of economists called for a 0.3 percent gain. Compared with a year ago, the PPI increased 3.5 percent.

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Economists pay close attention to the PPI report because several of its components feed into the Federal Reserve’s preferred inflation measure—the personal consumption expenditures (PCE) price index. Those categories were more favorable in January, registering declines in most healthcare items and in airfares.

The data on wholesale prices follows a surprising consumer price index (CPI) report yesterday that showed underlying inflation at the start of the year was highest since March. The figures sharply reduced odds that Fed policymakers will lower interest rates more than once in 2025, with some economists expecting no rate cuts due to the fallout from new duties on imported goods.

“The components that feed into the Fed’s preferred PCE price measure were, on the whole, very tame,” Paul Ashworth, the chief North America economist at Capital Economics, said in a note. “Overall, better news than yesterday on price inflation, but core PCE still comes in well above the 2 percent target.” Economists at Morgan Stanley, Goldman Sachs & Co., and Capital Economics were among those who pared their core PCE price index estimates compared with what they had penciled in after the CPI report.

Fed Chair Jerome Powell told lawmakers this week that inflation expectations “appear to remain well-anchored” and central bankers have scope to be patient with rate adjustments. Still, President Donald Trump’s policy proposals, including tariffs, have introduced uncertainty to the economic outlook.

The PPI report showed a 1.1 percent increase in food prices, including a 44 percent jump in egg prices from a month earlier amid an ongoing bird flu outbreak among U.S. poultry flocks. Energy prices rose 1.7 percent. Excluding food and energy, the PPI climbed 0.3 percent from December and 3.6 percent from January of last year. Overall goods prices increased 0.6 percent, marking a third straight month of outsized advances. The cost of goods excluding food and energy was up a more modest 0.1 percent for a second month. Prices of commodities more generally have been marching higher this year. The Bloomberg Commodity Index is near its highest level since May, in part reflecting higher prices for metals, corn, and coffee.

Meanwhile, the PPI report showed services prices rose 0.3 percent. The BLS said a third of that increase was accounted for by a surge in the cost of traveler accommodation services. Portfolio management services costs, a category that feeds into the PCE index and largely tracks movements in the stock market, rose for a second month.

A separate report released Thursday by the Labor Department showed initial applications for U.S. unemployment benefits declined last week by 7,000, to reach 213,000. Continuing claims, a proxy for the number of people receiving benefits, declined to 1.85 million in the week ended February 1.

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