Here's another sign that inflation was running hot even before the Iran war
Wholesale prices rose 0.7% in February, double the pace economists expected The PPI report captures inflation before the Iran war's energy shock
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Producer prices rose 0.7% in February on a seasonally adjusted basis, according to the Bureau of Labor Statistics — more than double the 0.3% increase economists had forecast and the fastest monthly gain since August 2023. On a 12-month basis, the producer price index rose 3.4%, the largest annual advance since February 2025.
Goods prices led the monthly increase, climbing 1.1%. Food prices rose 2.4%, with fresh and dry vegetables up 48.9%. Energy goods increased 2.3%. Services prices rose 0.5%, with traveler accommodation up 5.7% and securities brokerage and investment advisory services up 4.2%.
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Excluding food, energy, and trade services — a measure of underlying pipeline price pressure — the index rose 0.5% for the month and 3.5% over the past year. The monthly gain marked the 10th consecutive advance in that core measure.
The report covers February, before the U.S. and Israel launched strikes against Iran on Feb. 28. None of the inflation data released so far reflects the energy price increases that followed the start of the war. Oil has been trading around $100 a barrel, up more than 70% since the conflict began.
The services component of the February PPI drew particular attention. Fed policymakers have pointed to tariffs as a key driver of recent price increases — and tariffs tend to push up goods costs more than services. An unexpected rise in services prices therefore makes the Fed's job harder, leaving less room to begin cutting rates, according to CNBC.
The Fed's benchmark rate has been held in a range of 3.5% to 3.75% since December 2025. Rate futures markets are pricing in essentially no chance of an interest rate cut when the Fed announces its latest monetary policy decision on Wednesday afternoon.
The February PPI data follows a string of reports showing inflation was already running above the Fed's 2% target before the Iran war began. The February consumer price index showed a 2.4% annual rise, and the Commerce Department's core PCE measure — the Fed's primary forecasting tool — registered 3.1%.