U.S. October annual PPI hits four-year high, further reinforcing Federal Reserve rate hike expectations.

U.S. producer prices rose further in October, marking the largest annual increase in four years, reinforcing market expectations that the Federal Reserve may raise interest rates again after the widely anticipated rate hike next month. The U.S. Bureau of Labor Statistics (BLS) said Friday that October PPI rose 0.3% month-on-month, below the 0.4% consensus estimate, with the prior month’s figure revised up to 1.4%. Last month’s producer prices were lifted by a 0.5% gain in goods prices, driven mainly by food and basic organic chemicals. Services prices rose 0.2%, marking the fifth consecutive month of increases. October PPI surged 6.5% year-on-year, the largest annual rise since November 2022, following a 6.3% increase in September. The report arrives after this week’s October CPI data came in hotter than expected. Additionally, October nonfarm payrolls surged as released last week, with the unemployment rate dropping to 4.1% from 4.2% in September. Combined with remarks from Federal Reserve Governor Christopher Waller, this has left financial markets torn between pricing in a 25 basis point rate hike in December and keeping the door open to a 50 basis point increase.