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The December Producer Price Index didn’t just beat expectations, but it also revealed a persistent problem that forces markets to rethink the entire 2026 rate path. Final demand PPI rose 0.5% month-over-month, the sharpest jump since July, driven almost entirely by a 0.7% surge in services while goods prices sat flat. The headline came in at 3.0% year over year, beating expectations of 2.7%, but core PPI rose to 3.3% from 2.9%, the highest level since July 2025. Markets sold the news immediately. Bitcoin dipped below the $82,400 zone as it was trying to recover from an intraday low of $81,100. Meanwhile, Fed funds futures repriced to just 52 basis points of cuts for all of 2026, with the first quarter-point move now pegged for June. The dollar index is up 0.82% over the past 24 hours, and real yields on 10-year TIPS are near 1.90%. This raises the question of whether this confirms that disinflation has stalled in the exact place the Fed can’t ignore: services, where pricing power is sticky, and margins are expanding rather than compressing. Market Cap $1.64T 24h Volume $48.77B All-Time High $126,173.18 What actually ran hot and why it matters December’s report revealed sustained pricing power rather than transitory shocks. Trade services margins, which are the spread between what wholesalers and retailers pay versus what they charge, jumped 1.7%. Portfolio management fees climbed 2.0%, airline fares rose 2.9%, and hotel rooms spiked 7.3%. These aren’t categories buffeted by volatile commodity prices, but rather areas where firms successfully pass costs through to end users. Energy fell 1.4%, which normally would drag the headline lower. Instead, the service’s strength overpowered it. Even stripping out trade, transport, and warehousing, services still rose 0.3%. The Bureau’s narrowest core measure rose 0.4% for the eighth consecutive month, bringing the…

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Filed under: News - @ January 31, 2026 2:27 pm