As companies passed on import duties and hiked prices at the beginning of 2026, US producer prices surged in January, with the cost of products outside the volatile food and energy category rising by the greatest in almost three and a half years.
Economists’ views that the Federal Reserve would not continue lowering interest rates prior to its June 16–17 meeting were strengthened by the Labour Department’s Friday release of a stronger-than-expected increase in the Producer Price Index. A broadening of margins, including for the wholesale and commercial equipment business as well as the retail sales of clothing, accessories, and footwear, helped the PPI.
Last month, there was a strong increase in several components, including as domestic airfare and healthcare, that are used to calculate the Personal Consumption Expenditures price indexes, which are the inflation measures that the US central bank tracks for its 2% target. After rounding, economists calculated that the so-called core PCE inflation which does not include food and energy rose by as much as 0.5% per month in January. In December, that metric increased by 0.4%, the largest increase in ten months.
“As businesses pass on higher costs for services, wider producer margins could add some upside for consumer costs in the coming months,” stated Ben Ayers, senior economist at Nationwide. “We expect the Fed to stay on pause at its upcoming March meeting, given still-buoyant core inflation and the recent firming of job gains.
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