Friday’s came in hotter than expected, according to the report. The release reflected higher costs for services and weakened hopes for additional easing. PPI measures wholesale price changes that can feed into consumer inflation.
Markets still priced a low likelihood of a rate cut at the March or April Federal Reserve meetings. Dutta said near-term policy choices can lead to tougher hikes later. He also said Warsh’s reputation as a policy hawk shaped the market reaction.
Treasury trading showed a steeper curve after the announcement. The yield on two-year Treasuries fell two basis points to 3.54%. Meanwhile, 30-year yields rose to 4.88%, and the 10-year yield ticked up one basis point to 4.25%.
Krishna Guha at Evercore said the pick could stabilize the dollar and challenge “debasement” trades, which weighed on gold and silver. However, he warned against pushing a hawkish repricing too far and flagged whipsaw risk. TD Securities said investors may struggle to pin down Warsh’s views given his notable shifts.