US Producer Prices Surge in December

Higher import tariffs drive up costs, suggesting inflation could accelerate

Jan. 30, 2026 at 8:15am

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U.S. producer prices increased more than expected in December, with businesses appearing to pass on higher costs from import tariffs to consumers. The Producer Price Index for final demand surged 0.5% last month, exceeding economists' forecasts, as services prices jumped 0.7%. The data suggests inflation could pick up in the months ahead.

Why it matters

Rising producer prices, which reflect the costs faced by businesses, often lead to higher consumer prices down the line. This could put pressure on the Federal Reserve to continue raising interest rates to combat inflation, even as the central bank has signaled it expects tariff-driven price increases to peak in the middle of 2023.

The details

The larger-than-expected 0.5% increase in the Producer Price Index was driven by a 0.7% jump in services prices, with a 1.7% surge in margins for final demand trade services accounting for two-thirds of the services increase. Businesses had previously been absorbing some of President Trump's import tariffs, but now appear to be passing those higher costs on to consumers.

  • The Producer Price Index increased 0.5% in December 2022.
  • In the 12 months through December 2022, the PPI increased 3.0%.

The players

Federal Reserve

The central banking system of the United States that sets monetary policy, including interest rates, to promote economic growth and stability.

Jerome Powell

The current Chair of the Board of Governors of the Federal Reserve System.

President Donald Trump

The 45th President of the United States who implemented a series of import tariffs during his administration.

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What they’re saying

“But there's an expectation that sometime in the middle quarters of the year we'll see tariff inflation topping out.”

— Jerome Powell, Federal Reserve Chair (Federal Reserve)

What’s next

The Federal Reserve will continue to monitor inflation data closely as it determines future interest rate policy. Economists will also be watching to see if producer price increases continue to feed through to higher consumer prices in the coming months.

The takeaway

Rising producer prices driven by higher import tariffs are putting upward pressure on inflation, which could force the Federal Reserve to maintain its aggressive interest rate hikes in order to bring price increases back under control.