U.S. producer prices increased solidly in January, offering more evidence inflation was picking up again and strengthening financial market views that the Federal Reserve would not be cutting interest rates before the second half of the year.
The producer price index for final demand rose 0.4% last month after an upwardly revised 0.5% gain in December, the Labor Department's Bureau of Labor Statistics (BLS) said on Thursday. Economists polled by Reuters had forecast the PPI rising 0.3%. In the 12 months through January, the PPI advanced 3.5% after increasing 3.3% in December.
The report followed news on Wednesday that consumer prices accelerated by the most in nearly 1-1/2 years in January, dimming hopes that the U.S. central bank would resume cutting rates in June. Financial markets now expect a rate reduction in September, though some economists believe the window for further policy easing has closed, citing strong domestic demand and a stable labor market.