U.S. wholesale prices increased by 0.4% in August, aligning with market expectations, according to the latest producer price index (PPI) data released by the Bureau of Labor Statistics. On an annual basis, the PPI rose 5.4%, slightly above forecasts and still significantly higher than the Federal Reserve’s 2% inflation target. Core PPI, which excludes volatile food and energy prices, grew by 0.2%, a bit less than predicted, highlighting ongoing inflation pressures in the economy.

Energy prices drove much of the wholesale cost increases, with a 4.2% climb fueled by a sharp 24.1% surge in diesel prices. Goods prices broadly also rose by 1.1%, while service prices edged up just 0.1%, notably benefiting from a 2.3% increase in transportation and warehousing costs. Additional inflation signals were seen in processed and unprocessed goods, which rose 1.8% and 1.1%, respectively, pointing to persistent supply-side cost pressures.

This report arrives less than a week before the Federal Reserve is expected to announce its interest rate decision, potentially raising rates by a quarter percentage point after keeping them steady throughout much of 2026. Market participants slightly increased their bets on the rate hike following the PPI release, with the CME Group’s FedWatch tool showing about a 66% probability. Fed officials remain divided, with some advocating for swift action to contain inflation while others urge monitoring upcoming data.

The ongoing inflation challenges have been linked to factors such as tariffs and geopolitical tensions including the conflict in the Middle East. Investors reacted negatively to the report, with stock futures slipping and Treasury yields rising sharply, as the 10-year yield hit its highest level since November 2023. The consumer price index (CPI) release scheduled for Friday will offer further clues on inflation trends ahead of the critical Federal Reserve meeting.