Producer price inflation data came in higher than expected again today putting further pressure on the Federal Reserve to tighten monetary policy at its meeting this week.
U.S. producer prices rose to 9.6% year-on-year in November. The PPI rose by 0.8% MoM.
Core PPI rose 0.7% in November MoM and 7.7% YoY. This confirms last Friday’s CPI numbers which rose 6.8% to the highest level in nearly 40 years.
Analysts expect the Fed to accelerate the end of bond purchases. This means that financial markets could go from a monthly liquidity supply of $120 billion to zero in as little as three or four months. This could drag down markets and the economy if the Fed also starts to raise interest rates.