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Wholesale inflation rose 1.1% in May, reaching a 6.5% annual rate. The increase is largely driven by energy costs, keeping Federal Reserve policy on hold.
Wholesale prices rose more than anticipated in May, with the producer price index (PPI) climbing 1.1% on a seasonally adjusted basis [1]. This monthly increase pushed the 12-month wholesale inflation rate to 6.5%, marking the highest annual level since November 2022 [1].
Key takeaways
The Bureau of Labor Statistics reported that nearly 80% of the acceleration in the PPI was attributed to a 2.8% surge in final demand goods prices [1]. Within that category, energy prices jumped 10.7%, with wholesale gasoline costs rising 23.4% [1]. While the headline PPI figures exceeded expectations, some core metrics provided a different perspective; when excluding food, energy, and trade services, the PPI rose 0.8%, representing the largest one-month move since March 2022 [1].
There is some disagreement regarding the interpretation of these figures. While some analysts view the inflation bubble as partially transitory due to its heavy reliance on inelastic energy prices [2], others point to the broader impact of rising costs. For instance, portfolio management fees also contributed to the rise in services, increasing 4.8% during a month of strong stock market performance [1]. Meanwhile, wholesale service costs showed signs of cooling, decelerating to a 0.3% increase in May from a 0.7% rise in April [2].
The latest inflation data arrives shortly after the Bureau of Labor Statistics reported that consumer price inflation reached 4.2% in May, a trend largely attributed to energy supply shocks stemming from the war in Iran [1]. In response to the broader inflationary environment, the European Central Bank (ECB) voted to raise its benchmark interest rate by a quarter percentage point to 2.25% [1, 2]. The ECB noted that the economic outlook remains uncertain, citing upside risks for inflation and downside risks for growth [2].
In the United States, the Federal Reserve appears to be taking a different path. Market pricing indicates a near 100% probability that the Federal Open Market Committee will hold interest rates steady at its next meeting [1]. Most Fed officials have advocated for a patient approach, preferring to wait and see if the energy supply shock subsides before considering further policy adjustments [1]. Currently, traders are pricing in no interest rate cuts for the remainder of the year, with a greater than 60% probability that the next move by the central bank will be a rate hike in December [1].
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AI-assisted synthesis by the TrendWatcher Editorial Desk · sourced from 2 outlets · Jun 11, 2026 ·
The increase was largely driven by a 10.7% jump in energy costs, which accounted for nearly 80% of the rise in final demand goods prices.
The 1.1% monthly increase in the producer price index was higher than the 0.7% increase that economists surveyed by Dow Jones had anticipated.
The 12-month wholesale inflation rate is 6.5%, marking the highest annual headline rate since November 2022.
Markets are pricing in a near 100% probability that the Federal Reserve will hold interest rates steady at its next meeting, with some expectations of potential rate hikes later in the year.