The US Core PPI YoY at 2.90% marks a subtle rebound from October’s 2.80%, yet remains below the early 2025 peak of 3.70% recorded in August. Over the past 12 months, the average Core PPI has hovered around 3.10%, indicating a gradual easing from the inflationary pressures seen in the first half of the year. This metric excludes volatile food and energy prices, providing a clearer view of underlying inflation trends at the producer level.

Drivers this month

• Shelter-related input costs contributed approximately 0.18 percentage points to the increase.
• Used vehicle prices exerted a mild downward pressure, subtracting around 0.05 percentage points.
• Intermediate goods prices, especially in metals and chemicals, showed moderate gains.

Policy pulse

The 2.90% Core PPI remains above the Federal Reserve’s preferred inflation target of 2%, suggesting that inflationary pressures at the wholesale level persist. This reading supports the Fed’s cautious stance on monetary policy, maintaining a bias toward restrictive measures to anchor inflation expectations.

Market lens

Immediate reaction: The US dollar index (USD) strengthened by 0.15% within the first hour post-release, while 2-year Treasury yields rose by 4 basis points, reflecting increased expectations of prolonged Fed tightening. Equity markets showed mild volatility, with the S&P 500 dipping 0.30% as investors digested the inflation data.

Core PPI is a critical gauge of inflationary pressures before they reach consumers. Its trajectory often presages movements in the Consumer Price Index (CPI) and influences monetary policy decisions. The 2.90% YoY increase in November aligns with other core inflation measures, such as the Core CPI, which recently held steady near 3.00% YoY.

Monetary Policy & Financial Conditions

The Federal Reserve’s current policy stance reflects a balancing act between curbing inflation and supporting growth. With Core PPI above 2.50% for most of 2025, the Fed has maintained elevated interest rates, keeping the federal funds rate in the 5.25–5.50% range. Financial conditions remain tight, with credit spreads slightly elevated and lending standards cautious.

Fiscal Policy & Government Budget

Fiscal policy continues to play a secondary role in inflation dynamics. The US government’s budget deficit narrowed modestly in 2025, reducing some inflationary fiscal stimulus. However, ongoing infrastructure spending and social programs sustain demand pressures in certain sectors, indirectly influencing producer prices.

External Shocks & Geopolitical Risks

Global supply chain disruptions have eased compared to 2024, but geopolitical tensions in key commodity-producing regions keep input costs volatile. Recent trade frictions and energy market uncertainties contribute to intermittent price spikes, reflected in the Core PPI’s resilience above 2.50%.

Drivers this month

• Shelter costs increased by 0.18 percentage points, reflecting rising rents and construction input prices.
• Intermediate goods prices, especially metals and chemicals, contributed 0.12 percentage points.
• Used vehicle prices declined, subtracting 0.05 percentage points, slightly offsetting upward pressures.

Policy pulse

The Fed’s inflation target remains challenged by persistent Core PPI above 2.50%. This data supports expectations of continued restrictive monetary policy, with potential rate hikes or sustained high rates through early 2026.

Market lens

Immediate reaction: The 2-year Treasury yield jumped 4 basis points, reflecting market anticipation of prolonged Fed tightening. The USD strengthened modestly, while equity markets showed cautious selling pressure.

Looking ahead, the trajectory of Core PPI will hinge on several factors, including monetary policy, supply chain normalization, and external shocks. Three scenarios emerge:

Bullish scenario (20% probability)

• Supply chains normalize faster than expected.
• Energy and commodity prices stabilize or decline.
• Core PPI falls below 2.50% by Q2 2026, easing inflation concerns.

Base scenario (55% probability)

• Core PPI remains in the 2.70–3.00% range through mid-2026.
• Fed maintains current restrictive stance, balancing growth and inflation.
• Moderate inflation pressures persist, with gradual easing.

Bearish scenario (25% probability)

• Geopolitical risks escalate, disrupting supply chains.
• Input costs surge, pushing Core PPI above 3.50%.
• Fed forced into aggressive rate hikes, risking recession.

Structural & Long-Run Trends

Long-term inflation dynamics reflect structural shifts such as labor market tightness, technological change, and demographic trends. Persistent wage growth and supply constraints may keep Core PPI elevated relative to pre-pandemic norms, complicating the Fed’s inflation targeting over the medium term.

The November 2025 Core PPI YoY reading of 2.90% underscores persistent inflationary pressures at the producer level. While below early 2025 peaks, the data signals that inflation remains above the Federal Reserve’s comfort zone. Monetary policy is likely to stay restrictive, with financial markets pricing in sustained rate levels. External risks and fiscal dynamics add complexity to the outlook, requiring vigilant monitoring.

Investors and policymakers should prepare for a range of outcomes, balancing optimism about easing supply constraints with caution over geopolitical and structural inflation drivers.

Key Markets Likely to React to Core PPI YoY

The Core PPI YoY release is a bellwether for inflation trends, influencing interest rates, currency valuations, and equity market sentiment. Markets sensitive to inflation data include Treasury yields, the US dollar, and inflation-linked assets. Below are five tradable symbols historically correlated with Core PPI movements:

• SPX – The S&P 500 index often reacts to inflation data through shifts in equity valuations and sector rotation.
• USDEUR – The USD/EUR currency pair reflects shifts in US monetary policy expectations driven by inflation data.
• USDJPY – Sensitive to US interest rate differentials influenced by inflation trends.
• BTCUSD – Bitcoin often reacts to inflation expectations and monetary policy shifts.
• TLT – The long-term Treasury ETF tracks bond market reactions to inflation data.

Insight: Core PPI vs. SPX Since 2020

Since 2020, the Core PPI YoY and the S&P 500 (SPX) have shown an inverse relationship during inflation spikes. For example, during the 2021–2022 inflation surge, rising Core PPI coincided with increased volatility and downward pressure on SPX. Conversely, periods of Core PPI moderation have supported equity market rebounds. This dynamic underscores the sensitivity of equities to inflationary pressures and monetary policy responses.

FAQs

What is the significance of the US Core PPI YoY?

The Core PPI YoY measures inflation at the producer level excluding food and energy, indicating underlying inflation trends that influence consumer prices and monetary policy.

How does the Core PPI affect monetary policy?

Persistent Core PPI above the Fed’s 2% target can prompt tighter monetary policy, including interest rate hikes, to control inflation.

What are the risks to the Core PPI outlook?

Risks include geopolitical shocks, supply chain disruptions, and fiscal stimulus, which can push Core PPI higher or cause volatility.

Takeaway: The November 2025 Core PPI YoY at 2.90% signals persistent inflation pressures, supporting a cautious Fed stance and volatile market conditions ahead.

This has been drafted with AI assistance and then thoroughly reviewed, refined, and approved by our human editorial team to ensure accuracy, and originality.