Producers' price index rises 1.3% in September, signaling Fed rate hikes ahead.

The producer‑price index rose 1.3% in September, the biggest monthly jump since March 2022, and pushed the year‑over‑year increase to 6.3%, according to Thursday’s data. The surge was driven by a 20% spike in gasoline prices, but even after stripping out food, energy and trade services, prices were still up 0.5%, showing that inflation is spreading beyond energy. Wall Street analysts now expect the Federal Reserve’s preferred inflation gauge, the core personal consumption expenditures (PCE) index, to climb 0.32% in September, up from 0.25% in August, a rise that would lift the annual core inflation rate to about 3.1%.

The hotter PPI comes as the Fed tries to tame inflation that has lingered above its 2% target since 2021. The central bank raised rates last month after earlier data suggested price pressures were easing. Since April 2025, tariffs have added to the upward trend, and the conflict in Iran has further accelerated gains. Economists say the latest numbers revive concerns that the Fed may need to keep tightening policy, despite recent comments from officials suggesting a pause.

Seven Wall Street estimates gathered by CNBC show a range of 0.29% to 0.35% for September’s core PCE, with Barclays at the high end and Oxford Economics at the low. Nationwide chief economist Kathy Bostjancic warned of “real risks” that the Fed could deliver another rate hike in two weeks, even as some Fed speakers have signaled no rush. Fed futures reflected the split: a 29% chance of a hike at the meeting at the end of the month, but a 91% probability of at least one increase by December. Mizuho senior U.S. economist Alex Pelle called the picture “not benign,” saying the data give little reason for the Fed to hesitate.

The core PCE reading is due later this month and will be a key test for policymakers. If the forecast holds, the Fed may feel justified in raising rates again before year‑end, a move that could tighten credit and weigh on growth. Markets will watch the data closely, as another hike would signal that the central bank’s battle against inflation is far from over.