US producer prices climbed 0.4% in August, matching the Dow Jones consensus forecast, according to a Labor Department report released on Thursday. The reading kept wholesale inflation firm heading into next week’s Federal Reserve decision on interest rates.
Treasury yields moved higher through the session as desks positioned ahead of the data. The producer price index is the first of two inflation reports that will shape whether policymakers lift rates when they meet next week.
Higher gasoline prices drove much of the monthly increase. Energy costs were pushed up by elevated oil prices, a pressure traders have linked to the recent Iran conflict that revived inflation concerns across bond markets over the summer.
The 0.4% monthly gain suggests pipeline price pressures have not eased, complicating the case for any near-term rate cut. Benchmark yields have carried an upward bias in recent sessions as positioning tilted toward a firmer inflation print.
The wholesale figure feeds into forecasts for the consumer price index, the second report due before the central bank convenes. Together the two releases will guide expectations on the path of the benchmark rate.
Bond markets have been sensitive to energy-driven inflation for months, a dynamic evident since yields on long-dated debt reached multi-decade highs earlier in the summer. The August producer data extends that theme rather than breaking from it.
Traders on rate desks are weighing whether firm wholesale costs push the Fed toward a hike or hold. The forecast for the PPI at 0.4% was met precisely, leaving little room for a dovish reinterpretation of the print.
Attention now turns to the consumer price report and the Federal Reserve’s policy meeting next week, when the rate decision will be announced.