PREVIEW - US October PPI data will be released at 13:30GMT/08:30EST

• US PPI is expected to rise 0.4% M/M in October (prev. 1.3%), while the annual rate is seen accelerating to 6.6% Y/Y (from 6.3%). Core PPI is expected to increase 0.3% M/M (prev. 0.7%), with the annual rate seen unchanged at 5.0%.
• The release follows hotter than expected October CPI data, released earlier in the week, which saw headline prices rise 0.4% M/M (exp. 0.3%) and core prices increase 0.3% M/M (exp. 0.2%). Pantheon Macroeconomics said the CPI report was consistent with a 0.35-0.40% M/M increase in core PCE, ahead of its November 25th release.
• The PPI data will provide further insight into inflationary pressures ahead of the 9th December FOMC meeting, particularly after hawkish remarks from Fed Governor Waller, who this week suggested further tightening was needed, and that a 50bps December hike could be warranted if core CPI printed around 0.3% or higher.
• Money markets are currently fully pricing a hike of at least 25bps in December, with around an 12% probability of a larger 50bps move.

PPI typically arrives in CPI's shadow, and its standalone weight has historically been modest once the consumer print has already reset expectations; the precedent in episodes where CPI surprises first is that PPI acts as a confirmation or partial reversal of the initial repricing rather than a fresh catalyst in its own right. The transmission that matters here is the read-through to core PCE, since a subset of PPI components feeds directly into the PCE deflator, and the release is already being framed as a refinement of that estimate ahead of the December FOMC. The case distinction worth drawing is between headline and core: a hot headline driven by goods and energy carries less signal for the policy path than a firm core services print, which is the component central banks in this position have historically treated as the stickier problem. The conditional framing from Waller, tying a 50bps December move to core inflation at or around 0.3%, has arguably been met by the CPI print, which gives an upside PPI surprise an outsized effect on the hawkish tail relative to its usual weighting. With 25bps fully priced, the asymmetry sits in the probability assigned to the larger move, and the established channel is the front end, two-year yields and the dollar via rate differentials, rather than the long end. The follow-ons are the PCE print itself and whether other officials adopt the same conditional 50bps language between the release and the meeting.