The Producer Price Index (PPI) in the United States rose by 0.2% in November, exactly as expected. This shows that wholesale inflation is stable and aligns with analyst predictions. The latest PPI data indicates that wholesale inflation remains steady, similar to recent consumer price trends. Analysts will continue to track these numbers to understand how they might influence monetary policy, particularly interest rate changes by the Federal Reserve.

Indicators Affecting the Economy

This news comes after positive retail sales reports in the US, highlighting strong consumer spending. Traders are closely watching how these indicators impact the overall US economy, especially regarding inflation and possible rate cuts by the Fed. The stability in producer prices gives markets confidence that inflation may be under control on the wholesale level. However, ongoing economic changes and the Federal Reserve’s response will be key areas of focus. Looking back at the November 2025 PPI report, we note it was part of a trend toward lower inflation that wrapped up last year. That 0.2% increase supported the idea that price pressures were easing. This trend was confirmed when the December 2025 year-over-year PPI showed only a 1.9% rise. This ongoing reduction in wholesale inflation is central to our expectations for the first quarter of 2026.

Anticipating the Federal Reserve Meeting

As we approach the next Federal Reserve meeting at the end of January, attention turns to when the first interest rate cut will happen. The stability seen in late 2025, along with strong consumer spending, has strengthened market confidence. Currently, futures markets suggest there is an 85% chance that the Fed will start cutting rates in March 2026. In the coming weeks, a good strategy involves trading options on major stock indices. With a high likelihood of a dovish signal from the Fed, we should think about buying call options on the S&P 500 to take advantage of a possible market rally following the meeting. This strategy benefits from a positive market reaction when future rate cuts are confirmed. It’s also important to keep an eye on market volatility, which has been decreasing. The CBOE Volatility Index (VIX) is currently around 14.5, showing that uncertainty is lowering as the monetary policy outlook becomes clearer. Selling VIX futures or out-of-the-money call options might be a smart move to bet that the Fed’s predictable stance will keep market worries in check. For a more direct approach to interest rates, we can consider Secured Overnight Financing Rate (SOFR) futures. Taking a long position on these contracts allows us to speculate on the expected rate cuts throughout 2026. This reflects the belief that the inflation stability first indicated in November 2025 will enable the Fed to ease its policies. Create your live VT Markets account and start trading now.

here to set up a live account on VT Markets now