WASHINGTON —  Progress against inflation appears to have stalled, with wholesale prices coming in hotter than expected last month, further undercutting expectations for lower interest rates this year.

Many economists worry that President Trump’s policies will push inflation higher yet. His tariffs on foreign goods and plans to deport millions of undocumented workers could translate into higher prices. 

On Thursday, Mr. Trump said that he’ll sign an order that increases American tariffs to the rates other countries charge on imports.

The Labor Department reported Thursday that its producer price index — which tracks inflation before it reaches consumers — rose 0.4 percent from December and 3.5 percent compared with January 2024. 

The monthly increase was down from an upwardly revised 0.5 percent in December, and the year-over-year uptick matched December’s. But forecasters had expected a 0.2 percent change month over month and 3.2 percent year over year.

Excluding volatile food and energy prices, so-called core producer prices rose 0.3 percent last month from December and 3.6 percent from a year earlier.

Wholesale services prices rose 0.3 percent, pushed higher by increasing hotel costs. Goods services climbed 0.6 percent on higher energy prices, including a 10.4 percent rise in the price of diesel fuel. Wholesale food prices jumped 1.1 percent in January as the cost of eggs rocketed up 44 percent, reflecting the impact of bird flu.

The wholesale price report arrived a day after the Labor Department delivered some bad news about inflation at the consumer level. Its consumer price index rose 3 percent in January from a year ago, up from a 2.9 percent year-over-year increase in December.

Wholesale prices can offer an early look at where consumer inflation might be headed. Economists also watch it because some of its components, notably health care and financial services, flow into the Federal Reserve’s preferred inflation gauge — the personal consumption expenditures, or PCE, index.

Despite the higher-than-expected wholesale price increase, Paul Ashworth of Capital Economics wrote in a commentary, “the components that feed into the Fed’s preferred PCE price measure were, on the whole, very tame,” including modest changes in some health care prices.

Inflation flared up in early 2021 and the Fed later responded by

raising its benchmark interest rate — the fed funds rate — 11 times in 2022 and 2023. 

Inflation began tumbling — from a four-decade high of 9.1 percent in June 2022 to a low of 2.4 percent in September, tantalizingly close to the central bank’s 2 percent target. 

The Fed was satisfied enough to reverse course and cut its rate three times in the last four months of 2024.

Then the improvement on inflation stopped. Year-over-year consumer price inflation has now risen for four straight months.

In response to stubborn inflation, the Fed may hold off on further rate cuts. 

Back in December, it signaled that it expected to cut two more times in 2025. That seems far less likely now. 

Wall Street investors anticipate only rate cut this year and don’t expect that one until October.

Associated Press