Attention has turned to Friday’s Producer Price Index release after October’s U.S. inflation report came in hotter than expected, with traders asking whether wholesale prices could bolster expectations for a larger Federal Reserve rate increase in December.
The Consumer Price Index climbed 0.4% month over month, exceeding the 0.3% forecast, while core CPI rose 0.3%, versus economists’ estimate of 0.2%. Markets responded with higher Treasury yields, declines in stocks and crypto, and renewed scrutiny of comments from Fed officials on rates.
CPI Repricing Reaches Stocks, Bonds and Crypto
The Bureau of Labor Statistics (BLS) attributed October’s increase partly to shelter, food and a rebound in energy costs. The BLS did not publish official 12-month comparisons, as data collection gaps followed the October 2025 government shutdown.
Following the report, the two-year Treasury yield rose roughly 18 basis points, and the 10-year yield hit 5%. The Nasdaq Composite dropped 0.7%. The dollar index climbed above 102, while EUR/USD neared 1.1170. Bitcoin traded between $73,500 and $74,500 as risk-off sentiment weighed on crypto markets.
Markets fully priced in a 25-basis-point Fed hike for December, while assigning roughly 11% to 14% odds of a 50-basis-point increase. Ahead of the CPI release, Governor Christopher Waller said a half-point move should stay on the table if core inflation came in around 0.3% or higher. Dallas Fed President Lorie Logan also struck a hawkish tone, according to the report.
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PPI Forecasts Put Core PCE in Focus
Friday’s October PPI report is expected to show headline producer prices rising 0.4% month over month and core PPI up 0.3%. That would be a slowdown from September’s 1.3% monthly gain. September’s annual PPI rate stood at 6.3%, compared with consumer inflation of about 3.7%.
Economists are also watching the PPI components used to calculate core Personal Consumption Expenditures (PCE) inflation, including healthcare, financial services and airfares. Early estimates place the 12-month core PCE at 3.3%, up from 3.1%.
With the CPI release fresh, traders are focused on whether wholesale inflation will beat forecasts and shift December rate expectations. A PPI reading above 0.4% could heighten focus on the possibility of a 50-basis-point hike, while equity investors are also watching whether producer costs could squeeze corporate margins.
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Related: GBP Slips Against USD Ahead of US CPI: Is an Inflation Shock Coming?
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