U.S. producer prices rose just 0.1% in October and 0.2% in November, showing cooling inflation pressures. However, the core PPI, excluding food and energy, jumped 0.7% in October alone. Annually, core prices are up 3.5%, the largest increase since March, complicating the Federal Reserve's path forward.

This mixed data leaves the Fed in a tough spot. While broader inflation is easing, persistent core pressures suggest underlying price strength. Markets still expect about two rate cuts in 2026, but officials signaled only one reduction may be coming. A cooling jobs market could sway them toward more aggressive easing.

Investors are balancing these signals against Tuesday’s cooler consumer price data, which reinforced rate cut bets. With the Fed having cut rates three times late last year, the question now is timing. The next policy meeting will be scrutinized for hints on whether sticky core inflation or slowing growth takes priority.