A recent report highlighted a surge in the producer price index (PPI), indicating a significant shift in inflation patterns. On November 21, 2025, the PPI rose by 1.3%, marking the largest monthly increase since March 2022 and surpassing the consensus estimate of 0.6%. This uptick has implications for the Federal Reserve’s monetary policy, as it could affect interest rate decisions moving forward.
The annual growth of the PPI now stands at 6.3%, representing the most substantial spike since December 2022. A notable factor driving this increase is a steep 20% rise in gasoline prices. Furthermore, when excluding volatile categories such as food and energy, the core PPI still increased by 0.5%, suggesting that inflationary pressures may be more widespread than previously thought.
Estimates from seven Wall Street analytics, compiled by CNBC, predict that the core personal consumption expenditures (PCE) inflation for September will rise to 0.32%, up from 0.25% in August. Economists formulate their predictions for the PCE using both the consumer price index, which was released recently, and the PPI data.
Kathy Bostjancic, chief economist at Nationwide, cautioned that there are substantial risks the Fed may implement another rate hike in the upcoming two weeks, despite some recent central bank communications easing expectations for consecutive increases.
While certain Federal Reserve officials have suggested that the pace of rate hikes should not be hurried, they acknowledge that further increases may still be necessary. At present, market indicators show a 29% likelihood of a rate hike during the Fed’s meeting later this month, but a much higher probability of 91% for at least one increase by December.
A projected 0.32% increase in core PCE would elevate the year-over-year core inflation rate to 3.1%, exceeding August’s figure of 3.01%. Estimates by various analysts vary, with Barclays foreseeing a high of 0.35% and Oxford Economics predicting a modest increase of 0.29%.
Alex Pelle, a senior U.S. economist at Mizuho Securities, pointed out that the inflation landscape is concerning, with rates remaining elevated and escalating. Pelle remarked, “On the economic data alone, there is little reason for the Fed to hesitate to continue moving the policy rate higher.”
Federal Reserve Chairman Kevin Warsh has suggested a key criterion for refraining from rate hikes is the assurance that inflation will revert to the Fed’s target of 2% in a timely manner. Both measures of headline and core PCE inflation have remained above this target since 2021, largely influenced by factors such as tariffs imposed in April 2025 and the subsequent economic volatility linked to the ongoing Iran conflict.
The Federal Reserve favors the PCE inflation measure over the consumer price index (CPI) because it believes the PCE more accurately captures consumer spending patterns, adapting its weights based on shifts in spending behavior.
