Producer prices rose 3% in 2025 as inflation lingered
Producer prices rose 3% year-over-year in December 2025, the Bureau of Labor Statistics reported, leaving PPI about one percentage point above the federal Reserve’s 2% target. On a monthly basis PPI increased 0.5%; core PPI (excluding food and energy) climbed 3.3% annually and 0.7% month-to-month. The consumer price index grew 2.7% over the year. The Fed, concerned that inflation remains too high despite recent rate cuts and a cooling labor market, held rates steady at its first 2026 meeting. Labor data showed 50,000 jobs added in December and a 4.4% unemployment rate, though revisions left the three-month average negative; private-sector hiring averaged roughly 30,000 per month.Economists are watching for tariff-driven price effects, and persistent affordability worries are weighing on public sentiment and political approval.
Producer prices rose 3% in 2025 as inflation lingered
Inflation, as measured by the producer price index, rose 3% the year ending in December, the Bureau of Labor Statistics reported Friday.
The report indicates that inflation tracked by the PPI still remains a full percentage point above the Federal Reserve‘s target.
Economists have been examining producer price index reports and other inflation reports for indications that President Donald Trump’s tariffs have driven up certain prices or if underlying price pressures are abating.
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On a month-to-month basis, the price index increased by 0.5%, more than was expected.
Core PPI inflation, which strips out volatile food and energy prices, rose to 3.3% on an annual basis. Core inflation rose 0.7% on a monthly basis, well above expectations.
Friday morning’s report on producer prices comes after the consumer price index report showed that inflation trended down in 2025. While lower inflation is a favorable development for Trump’s political process, the decline has not steep enough to improve the public’s perceptions of the economy. Measures of consumer sentiment and household economic confidence remain historically low.
Inflation rose 2.7% the year ending in December, according to the CPI. The Fed’s target is 2%.
The Fed typically keeps interest rates higher when inflation is running too hot. In recent months, though, the central bank has begun cutting rates, in large part because officials have been concerned about softening in the labor market.
Still, at its first meeting of 2026 this week, the Fed voted to hold interest rates steady, citing lingering concerns about too-high inflation and the relatively stable labor market. This year is likely to feature fewer interest rate revisions, as the central bank works to depress inflation.
While the jobs market has weakened, it is still above water.
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The economy added 50,000 jobs in December 2025, and the unemployment rate fell to 4.4%. But with revisions to the numbers for October and November, the three-month moving average of job gains was minus-22,000 in December. Despite that, private-sector job growth has been better, averaging nearly 30,000 over the past three months.
Despite declines in overall inflation in 2025, families across the country are still expressing discontent with prices and are reporting affordability issues. That discontent has hurt Trump’s approval ratings and has made the economy one of the top issues heading into this year’s midterm elections.
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