U.S. wholesale prices rose hotter than expected in February, according to the Labor Department’s producer price report that measures inflation before it reaches consumers. The department said the producer price index rose 0.7% from January, and 3.4% compared with February 2025, marking the largest year-over-year increase since February 2025.
The report arrived while Federal Reserve policymakers were meeting in Washington to decide what to do with the benchmark interest rate. The Fed cut the rate three times last year as inflation appeared to slow, but it has since stopped cutting and was expected to announce Wednesday that it is done so again, as it weighs whether inflationary pressures are easing and whether weakness in the job market needs lower borrowing costs.
In the details, the Labor Department said food costs rose 2.4% from January. The increases were led by a 49% surge in vegetable prices and a 10% increase in fruit prices, according to the producer price report. The report also showed that wholesale inflation had already been unexpectedly higher in January.
Excluding volatile food and energy prices, the Labor Department said so-called core wholesale prices rose 0.5% from January. Core prices were up 3.9% from a year earlier, the biggest jump since January 2025, according to the report, signaling that more than just food costs were moving higher at the producer level.
Economists pointed to tariffs implemented by the Trump administration as one reason producer prices have stayed elevated. Stephen Stanley, the chief U.S. economist at Santander, said companies have largely been absorbing the higher costs that arrived after the tariffs, adding that the producer-price index “is signaling that this is not a one-off wave of costs that would necessitate a single set of consumer price adjustments.” Stanley added that “instead, the pipeline pressures continue to build,” in commentary on Wednesday.
Other economists tied the inflation outlook to the timing of the Iran war and the jump in energy prices. Carl B. Weinberg, chief economist at High Frequency Economics, wrote that “These are some mighty big increases, adding fuel to the political conversation about affordability,” and said energy prices “will spike higher in the March report,” citing the war in Iran and the blockade of the Strait of Hormuz.
The report landed as energy costs were already rising following the U.S. and Israel attacks on Iran, with oil prices surging nearly 50% since the war began, according to the Associated Press account. The gasoline market moved higher as well; the article said the average price for a gallon reached $3.84, after a gallon had been under $3 last month before the attacks. Diesel prices—used heavily in transportation—were also described as rising even faster.
The producer-price release came on the same day as earlier consumer-inflation reports showed that inflation remained above the Fed’s 2% target before the Iran attacks. The Labor Department’s report on consumer prices showed prices rose 2.4% in February versus a year earlier, and the Commerce Department said the Fed’s preferred inflation measure, the personal consumption expenditures (PCE) price index, was up 2.8% in January from a year earlier; core PCE prices rose 3.1%, the largest increase in nearly two years.
Markets reacted to the producer-price report. The Associated Press account said the S&P 500, the Dow and the Nasdaq Composite reversed course and went negative at the open after the producer-price data and a resumption of the upward climb in oil prices, as investors took note of the new inflation signal ahead of the Fed’s decision.