On the surface, the weaker than expected 0.2% m/m increase in final demand PPI and unchanged level of core final demand PPI in December seems encouraging, but they mask some price jumps in a few of the key components which feed directly into the Fed’s preferred core PCE inflation gauge. At this point, it looks like core PCE prices rose at an above-target 0.27% m/m pace last month, but that could change after tomorrow’s release of the CPI data.
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