US producer prices holds at 2.6% in May; wholesale prices rose 0.1% from April, Fed seen staying cautious on rate cuts

US producer prices rose modestly in May, offering further evidence that inflationary pressures remain subdued even as tariffs continue to loom over global trade, according to data released by the Labor Department on Thursday.The Producer Price Index (PPI), which tracks inflation at the wholesale level before it reaches consumers, rose 2.6% in May from a year earlier. On a monthly basis, prices increased just 0.1% after a 0.2% decline in April. Both readings came in slightly below economists' expectations, AP reported.Excluding the often-volatile categories of food and energy, so-called core wholesale prices rose 0.1% from April and 3% from a year earlier.Energy prices were flat overall, although gasoline rose 1.6% following a decline the previous month. Food prices at the wholesale level edged up 0.1%, while egg prices — which had dropped a sharp 39.3% in April — rebounded by 1.4% in May. Egg prices remain 125% higher compared to May 2024, largely due to supply disruptions from the bird flu outbreak.The PPI data came a day after the Consumer Price Index showed a similar trend, with consumer inflation rising just 0.1% month-on-month and 2.4% year-on-year in May.

Despite US President Donald Trump’s sweeping tariff policy — which includes a 10% baseline levy on nearly all imports and targeted duties on steel, aluminum, and autos — inflation has yet to show a broad-based resurgence. Economists caution, however, that the full effects of the tariffs may emerge later in the year as supply chains adjust and importers pass on higher costs.The PPI is closely watched because some of its components, such as health care and financial services, are factored into the Federal Reserve’s preferred inflation gauge, the Personal Consumption Expenditures (PCE) index.Inflation surged in 2021 as the economy rebounded sharply from pandemic-era lockdowns, prompting the Federal Reserve to raise interest rates 11 times in 2022 and 2023. Those aggressive hikes helped tame inflation from its 2022 peak, allowing the Fed to cut rates three times last year.However, the Fed has adopted a more cautious stance in 2025 amid uncertainty over the inflationary effects of recent trade measures. The central bank is widely expected to keep its benchmark rate unchanged at next week’s policy meeting.