Markets received a pre-CPI boost from a cooler-than-expected Producer Price Index (PPI) reading. In December, producer prices increased by 0.2%, lower than the anticipated 0.4% rise. Core PPI, which excludes food and energy costs, was steady, maintaining its 0.3% increase from November. This report prepares the market for the closely watched Consumer Price Index (CPI) reading set for release at 8:30 am ET. Analysts, however, urge caution, warning that a subdued PPI should not be interpreted as a signal for future interest rate cuts. Concerns persist over persistent inflation, especially after the Federal Reserve's previous rate cuts, leading investors to question those decisions. The projection for the upcoming CPI is a headline rate of 2.9%, inching up from November's 2.7%, while core CPI is expected to hold steady at 3.3%. Following the PPI announcement, the likelihood of a 25 basis point rate cut in March has increased slightly, with fed funds futures now showing a 21.6% chance, up from 19.4%.

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