- Sarah House, Wells Fargo Securities
US producer prices posted the largest increase in more than four years last month amid higher energy-related production costs, official figures revealed on Tuesday. The US Labor Department reported its Producer Price Index advanced 0.6% in January, while market analysts expected the Index to remain unchanged from the previous month at 0.3%. That marked the largest gain since September 2012. However, on an annual basis, producer prices climbed just 1.6% in the first month of 2017, after a similar increase in December. In the meantime, the so-called core PPI, which excludes volatile items, jumped 0.4% month-over-month in January, compared with analysts' expectations for an unchanged reading of 0.2%. Year-over-year, core producer prices grew 1.6% last month, following December's gain of 1.7% and providing support for the view that the Federal Reserve could raise rates in the upcoming months as promised. Back in December, the Central bank raised its overnight rate to a range of 0.50-0.75% and projected three more rate hikes in 2017. The Federal Reserve Chair Janet Yellen said on Tuesday that the Bank would probably increase rates already at its next policy meeting in March. Following Janet Yellen's comments, the US Dollar hit its three-week high against a basket of currencies., while US government bonds dropped markedly.
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