U.S. wholesale inflation accelerated sharply in April, with the Producer Price Index for final demand hitting 6% year-over-year — the hottest reading since January 2023. The number blew past the 4.9% consensus forecast, according to data released Wednesday. On a monthly basis, prices rose 1.4%, nearly triple the 0.5% economists had expected.
Services drive the surge
Services accounted for about 60% of the headline increase. Final demand services climbed 1.2% month-over-month, the largest jump since March 2022. Within that, trade services margins rose 2.7%, while transportation and warehousing prices surged 5%. The broader core measure — excluding food, energy, and trade services — rose 1% month-over-month and 5.2% year-over-year, both above estimates. Even the narrowest core, which strips out food, energy, and trade services, advanced 0.6% monthly and 4.4% annually, near its highest since early 2023.
Energy prices climb amid Iran conflict
Goods inflation also accelerated. Final demand goods rose 2% for the month, driven by a 7.8% jump in energy prices. Gasoline alone surged 15.6%. The energy spike was linked to the ongoing Iran war, which continues to disrupt crude and refined product markets. The war's effect on supply chains has kept upward pressure on fuel costs for months.
Bond market reaction
Treasury yields spiked after the release. The 30-year yield hit 5.042%, just below its 19-year peak. Bond traders quickly priced in renewed risks of Federal Reserve rate hikes. Goldman Sachs pushed back its next rate-cut forecast to December 2026, effectively taking a 2025 cut off the table. Equity futures sold off, and the dollar firmed against major currencies.
What this means for the Fed
Analysts at the Kobeissi Letter noted that both the Consumer Price Index and PPI are now at three-year highs. “Odds of rate hikes are rising,” they wrote, pointing to the sustained inflation pressure. The Fed had been expected to hold rates steady through mid-2026, but the latest data suggests policymakers may need to consider tightening again. With energy costs still rising and services inflation broadening, the central bank faces renewed pressure to act.
Goldman's revised timeline now predicts no rate cuts until late 2026, leaving markets to wonder whether the next move from the Fed will be a hike — and how high rates might need to go.
