US wholesale inflation in February significantly exceeded expectations

In February, the wholesale cost of goods and services in the U.S. - the segment where rising inflation usually shows up earliest - rose much more strongly than expected, CNBC writes.

According to the U.S. Bureau of Statistics, the overall Producer Price Index (PPI) - a measure of manufacturers' costs while supplying their products - rose a seasonally adjusted 0.7% last month. Excluding volatile food and energy prices, the so-called core PPI - rose 0.5%. Economists surveyed by Dow Jones expected these indicators to grow by 0.3%, CNBC writes.

On an annualized basis, PPI reached 3.4%, according to the data of the agency; this was its highest value since February 2025, while the core PPI (excluding volatile food and energy prices) for the same time was recorded at 3.9%. Both of these values are significantly higher than the Federal Reserve's (Fed) target of 2%, CNBC recalls.

In January, the overall producer price index (PPI) rose 0.5% (although economists had expected to see the index rise 0.3%), while core PPI added 0.8% (although it was also expected to rise 0.3% over the period).

The sharp jump in PPI was largely due to a 0.5% increase in the cost of services. For the Fed, such a scenario is highly undesirable, writes CNBC - previously, officials attributed the recent spike in inflation in the U.S. mainly to the introduction of tariffs by the administration of the President of the United States, which have a minimal impact on the services sector. The main drivers within the PPI measurement were portfolio management fees, which rose by 1%, as well as brokerage, dealing and investment advisory services, which rose in price by 4.2%, CNBC reports.

Prices for goods for the month increased by 1.1%. In particular, the cost of food products rose by 2.4%, with the price index for fresh and dried vegetables showing an abnormal growth, soaring by 48.9%. Energy prices added 2.3% over the month.

The situation is aggravated by the escalation of the conflict in the Middle East, notes CNBC. Mutual strikes by the U.S. and Israel on facilities in Iran provoked a sharp jump in energy prices: the cost of oil has been hovering around $100 per barrel for about two weeks, which means an increase of more than 60% since the beginning of 2026.

- "PPI only confirms the obvious. The war is causing inflation to spread in circles throughout the economy. And this will not be a temporary phenomenon. It will take time to digest the cost increases triggered by oil prices," said Gerber Kawasaki Wealth and Investment Management President and CEO Ross Gerber (quoted in Investing).

- "The most important developments since the last Federal Open Market Committee meeting have been the outbreak of war in Iran and the surge in oil prices. For the Fed, the war increases both the risk of needing to cut rates early because of a cooling labor market and the risk that the high trajectory of inflation will force a postponement of that cut," said Goldman Sachs analyst Devil Mericle.

- Financial markets are now pricing in expectations of just one rate cut this year. "The bottom line is that the price data don't contain anything that indicates the Fed is ready for another rate cut anytime soon, even if oil prices suddenly fall," pointed out Thomas Ryan, North America economist at Capital Economics(quoted by Reuters).

After the report was published, stock market futures declined and Treasury bond yields rose. The Dow Jones Industrial Average fell after the opening of trading on March 18 by 0.9%, the S&P 500 fell by 0.7%, and the technology index Nasdaq Composite also fell by 0.7%.

Later on Wednesday, March 18, the Fed will announce its interest rate decision. According to the FedWatch market sentiment monitoring tool, traders estimate the probability of the interest rate remaining at the current level following the Fed meeting on March 18 at 98.9%.

This article was AI-translated and verified by a human editor