Rate-Cut Odds Tumble As US Producer Prices Surged In February – Hottest In Over A Year

After a hotter than expected print in January, US Producer Prices were expected to continue to rise (but only modestly) in February data released today. The consensus direction was right but the scale was way off as headline PPI accelerated 0.7% MoM (vs +0.3% exp and +0.5% prior) – the biggest monthly jump since July 2025.

That lifted producer prices higher by 3.4% YoY (notably hitter than the 3.0% expected and up from the 2.9% prior). That is the hottest PPI since January 2025…

Source: Bloomberg

More than half of the February rise in prices for final demand can be attributed to a 0.5-percent advance in the index for final demand services. Prices for final demand goods increased 1.1 percent.

Core PPI (ex Food and Energy) also soared (+0.5% MoM) pushing core prices up by 3.9% YoY – the highest since Jan 2025…

Source: Bloomberg

…and if oil prices remain elevated, PPI (and CPI) are about to become a whole lot hotter…

And the pipeline for producer price inflation is higher…

Margin pressures remain as input prices rise faster than output prices…

The bottom line is that this will likely lead to a hotter than expected Core PCE print – something The Fed watches closely – and rate-cut odds are falling on the news…

…with no rate action at all priced in for today.