Producer Prices For March Come In Well Below Economist Estimates: Market Still Anticipates Another 0.25% Rate Hike

The SPDR S&P 500 SPY is rising Thursday morning after new data showed that U.S. producer prices fell more than economists expected last month, another sign the Federal Reserve's aggressive response to high inflation is starting to take effect.

What Happened: The producer price index (PPI) fell 0.5% in March, according to new data the Labor Department released Thursday. The number came in below average economist forecasts for a 0.1% increase. 

The cooler-than-expected PPI print comes on the heels of a 0.1% decline in February, which was well below expectations and down from a 0.3% increase in January. 

On a year-over-year basis, the PPI number came in at 2.7% versus estimates of 3%. Excluding volatile food, energy and trade prices, PPI decreased 0.1%.

Why It Matters: The Fed is due to make its next decision on rates next month before CPI and PPI for April is released, so this will be the last look at pricing data the Fed will get to see before it runs its next play.

Thursday's print comes in the wake of a cooler-than-expected CPI number. The headline CPI for March came in at 5% year-over-year this week, which was down from 6% in February and below economist forecasts of 5.2%. Core CPI came in as expected at 5.6%.

Minutes from the Fed's last meeting showed the committee remains committed to its 2% inflation goal and anticipates that some additional firming may be appropriate. Fed members also noted that they would continue to analyze incoming data.

In a press conference following the committee's last decision on rates, Fed Chair Jerome Powell said there are real costs to bringing inflation down to 2%, but "the costs of failing are much higher."

The market is projecting a 66.5% chance of another 0.25% rate hike next month and a 33.5% chance of a pause, according to the CME Group's FedWatch tool. 

The Fed is due to make its next move in its historic fight against inflation on May 3. 

SPY Price Action: The SPY was up 0.27% at $409.17 at the time of writing, according to Benzinga Pro.

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