Wholesale prices rose sharply in February, providing another sign that inflation continues to percolate even aside from rising energy costs.

The producer price index, a measure of pipeline costs that producers receive for their products, increased a seasonally adjusted 0.7% on the month, the Bureau of Labor Statistics reported Wednesday. Excluding volatile food and energy costs, the so-called core PPI increased 0.5%.

Economists surveyed by Dow Jones had been looking for increases of 0.3% for both measures.

For the all-items index, prices rose faster than the 0.5% pace in January. However, the core increase was less than the 0.8% for the prior month.

On a 12-month basis, headline PPI inflation was at 3.4%, the most since February 2025, while core was at 3.9%, according to the BLS. The Federal Reserve targets inflation at 2%.

Stock market futures slipped following the report while Treasury yields were higher. Futures traders pushed out the next Fed interest rate cut until at least December.

The surge in PPI came due in large part to a 0.5% increase in services costs, something the Fed would not welcome. Policymakers have attributed much of the recent run-up in inflation to tariffs, which would not show up as much on the services end. Portfolio management fees, a key driver for services costs within the PPI measurement, were up 1% in February. Similarly, prices for securities brokerage, dealing, investment advice and related services accelerated 4.2%.

Goods prices rose 1.1% on the month.

Food prices rose 2.4% while energy was up 2.3%. Within food, the index for fresh and dry vegetables soared 48.9%.

The report suggests that pipeline inflation pressures remain persistent, particularly on the services side, complicating the Fed’s path as it weighs how long to keep interest rates elevated.

The report comes with inflation worries accelerating amid the fighting in the Middle East. The U.S. and Israel continue to strike at targets in Iran, causing energy prices to surge. Oil has been trading around $100 a barrel, up more than 70% year to date as the conflict has proceeded.

None of the inflation data so far has captured the price increases associated with the war. But it has indicated that even before the attacks, inflation was a problem. A report last week indicated that consumer prices rose at a 2.4% rate in February. Separately, the Commerce Department said its main inflation gauge, which the Fed uses as its forecasting tool, was at 3.1% for core and 2.8% for headline.

Later Wednesday, the Fed will release its latest interest rate decision. Market participants consider it a near certainty that central bankers will vote to keep their benchmark overnight interest rate anchored in a range between 3.5%-3.75%, where it has been since the last cut in December 2025.

Mortgage rates last week jumped to the highest level since the end of last year, causing a crash in the growing refinance demand the market had been seeing at the start of this year. That pushed total mortgage application volume down 10.9% compared with the previous week, according to the Mortgage Bankers Association’s seasonally adjusted index.

The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances, $832,750 or less, increased to 6.30% from 6.19%, with points increasing to 0.63 from 0.58, including the origination fee, for loans with a 20% down payment.

“Mortgage rates continued to move higher, driven by increasing Treasury yields as the conflict in the Middle East kept oil prices elevated, along with the risk of a broader inflationary shock. Mortgage rates increased across the board,” said Joel Kan, an MBA economist in a release.

Applications to refinance a home loan plunged 19% week-to week but were still 69% higher than the same week one year ago.

“Rates were around 20 basis points higher than they were two weeks ago, and this caused a reversal in refinance activity, particularly for conventional refinance applications, which decreased 27 percent over the week. Government refinances also declined but by 5 percent, as FHA rates have not increased quite as rapidly,” Kan added.

Applications for a mortgage to purchase a home managed to eke out a 1% gain for the week and were 12% higher than the same week one year ago. The all-important spring housing market, which officially begins at the end of this week, is kicking off with slightly more inventory than last year, and interest rates are still 42 basis points lower than they were a year ago.

Affordability is improving, with prices now dropping in some markets and flat in others compared with last spring.

Mortgage rates moved slightly lower to start this week, according to a separate survey from Mortgage News Daily. While most Federal Reserve watchers do not expect the central bank to cut its interest rate at the open market committee meeting today, there is always a possibility that commentary from the chairman could move bond markets.

“Fed days can still cause volatility in rates, for better or worse. In [Wednesday’s] case, any impact from the Fed should be smaller than it otherwise would have been due to the market’s preoccupation with geopolitical influences,” wrote Matthew Graham, chief operating officer at Mortgage News Daily.

President Donald Trump on Wednesday officially nominated Kevin Warsh to be the next chairman of the Federal Reserve.

Warsh, if confirmed by the Senate, would replace Fed Chairman Jerome Powell, for a four-year term.

Trump’s nomination was transmitted to the Senate, the White House said in a statement posted online on Wednesday.

That transmittal came more than a month after Trump first publicly announced he wanted Warsh as the Fed chairman.

Sen. Thom Tillis, a North Carolina Republican, has said he would block Warsh’s nomination from proceeding in the Senate until a federal criminal investigation of Powell by the U.S. Attorney’s Office in Washington, D.C., is dropped.

Tillis’ stance could prevent the nomination from being considered by the full Senate.

Powell said in mid-January that he was under investigation in connection with the $2.5 billion renovation of the Federal Reserve’s headquarters in Washington, and his testimony about that project to the Senate.

The chair also said that “the threat of criminal charges” against him is directly due to him and other Fed governors refusing to bow to Trump and his demands that they cut interest rates more quickly than the president has demanded.

Last summer, Trump tried to fire Fed Governor Lisa Cook, who sided with Powell on interest rate decisions. Trump, at the time, cited an allegation by a housing official he had picked that Cook had committed mortgage fraud, but his move to terminate her was seen as motivated by his ire over her stance on interest rates.

Cook, who has denied any wrongdoing, has remained on the Fed pending the outcome of a lawsuit against Trump challenging her removal.

The Supreme Court in January heard oral arguments in that case. The court has yet to issue a ruling on whether Trump can fire Cook.

American consumers and businesses are taking most of the hit from President Donald Trump’s tariffs, New York Federal Reserve President John Williams said Tuesday in remarks that counter White House claims.

“The tariffs have overwhelmingly been borne domestically — a New York Fed analysis estimates that most of the burden has fallen on U.S. firms and consumers.,” Williams said in remarks for a conference in Washington, D.C. “In addition, the tariffs have already meaningfully increased U.S. prices of imported goods, and the full effects have likely not yet been felt.”

The study Williams cited has generated a fair amount of controversy over the past few weeks.

In a white paper published on the New York Fed’s website, a team of researchers found that as much as 90% of the added cost from tariffs has been passed on to domestic producers and consumers. Trump and other White House officials had insisted that exporters would absorb the costs rather than raise prices.

National Economic Council Director Kevin Hassett flamed the controversy during a CNBC appearance in which he suggested that the researchers should be “disciplined” for what he termed was “the worst paper I’ve ever seen in the history of the Federal Reserve system.” Hassett later stepped back the criticism.

Addressing the issue for the first time publicly, Williams said not only were the tariffs being felt at home, but they also were keeping the Fed from reaching its 2% inflation goal.

“My current estimate is that, to date, the increase in tariffs has contributed around one half to three quarters of a percentage point to the current inflation rate of about 3 percent,” he said. “The FOMC defines price stability as 2 percent inflation over the longer run. Owing to the effects of tariffs, progress toward that goal has temporarily stalled.”

On the bright side, Williams said he still expects the tariff impact on inflation to be temporary, and he sees the Fed hitting its target by 2027. He added that the U.S. economy “appears to be on a good footing.”

As for current policy, he said it is “well positioned” for the Fed to hit its dual mandate goal of steady prices and full employment. Should inflation progress lower after the tariff impact fades, “further reductions in the federal funds rate will eventually be warranted to prevent monetary policy from inadvertently becoming more restrictive.”

Markets expect the Fed to resume cutting later this year, possibly in July or September, according to current futures pricing. As New York Fed president, Williams carries extra influence on the Federal Open Market Committee, where he is a permanent voting member.

Chicago Federal Reserve President Austan Goolsbee said Tuesday that interest rate cuts aren’t appropriate until there’s more evidence that inflation is on its way down.

With recent indicators showing that inflation well off its highs but still above the Fed’s 2% target, Goolsbee noted that policymakers “have been burned by assuming transitory inflation” in the past and shouldn’t make the same mistake again.

“I feel that front-loading too many rate cuts is not prudent in that circumstance,” he said in remarks before the National Association for Business Economics at its annual gathering in Washington, D.C. “People express that prices are one of their most pressing concerns. Let’s pay attention. Before we cut rates more to stimulate the economy, let’s be sure inflation is heading back to 2%.”

The most recent inflation data, for December, showed core inflation, which excludes volatile food and energy prices, running at 3%, as measured by the consumption expenditures price index, the Fed’s primary forecasting gauge. That was up 0.2 percentage point from November and came somewhat due to tariffs, which are viewed as temporary, but also from underlying pressures in the service sector and areas not directly impacted by the duties.

Specifically, Goolsbee said stubbornly high housing inflation isn’t tariff driven, emphasizing the need for the Fed to be “vigilant.”

Goolsbee noted that a 3% inflation rate “is not good enough — and it’s not what we promised when the Federal Reserve committed to the 2% target. Stalling out at 3% is not a safe place to be for a myriad of reasons we know all too well.” He has said previously that he thinks the Fed will be able to cut later in the year.

The remarks come with markets expecting the Federal Open Market Committee, of which Goolsbee is a voter this year, to stay on hold until at least June and probably July. Futures traders are placing about a 50-50 chance of a cut in June and about a 71% probability of a July cut, according to the CME Group’s FedWatch gauge. The Fed enacted three quarter-percentage-point cuts in the latter part of 2025.

Fed Governor Christopher Waller, who has been an advocate for lower rates, took a more measured approach Monday while also speaking to the NABE conference.

Though Waller said he thinks policymakers should “look through” tariff impacts, he said recent data show the labor market may be in better shape than previously indicated, mitigating the need for further cuts. If the jobs picture continues to improve, that would further lessen the case for cuts, though he said he isn’t convinced that the January nonfarm payrolls data wasn’t “more noise than signal.”

Tuesday will be an active day Fed speakers, with Governor Lisa Cook also due to present to the NABE later in the morning.

Hyperscalers are significantly ramping up their AI capex spending — and increasingly using credit markets to fund it.

But investors say this shift is challenging mega-cap tech giants’ so-called ‘fortress balance sheet’ status, and rips up what they call the “unspoken contract” that kept speculative AI spending largely separate from debt markets.

After Amazon, Meta and Google-owner Alphabet all unveiled sizable increases in their full-year capex spending plans during earnings season, UBS data indicates that aggregated capex spend among AI hyperscalers could top $770 billion in 2026 — some 23% higher than previously expected.

In a Feb. 18 note, UBS credit strategists said such increases imply a $40 billion to $50 billion ramp-up in borrowing from hyperscalers, pushing public market debt issuance to between $230 to $240 billion this year.

Al Cattermole, fixed income portfolio manager at Mirabaud Asset Management, said this tilt toward the bond market is dramatically shifting the dynamic between hyperscalers and investors.

“For years, we’ve been told this AI spend would be funded by generated cash flow — that it is equity risk, it is speculative, and not to worry about it from a credit point of view,” Cattermole told CNBC in an interview.

“There now seems to be a change in the unspoken contract that while we would continue to lend to these businesses, really AI capex was still going to be equity or cash funded….By bringing capex spend into the debt markets, you now have the question of credit worthiness.”

Last September, Oracle tapped the bond market for some $18 billion in one of the biggest debt issuances on record. Others have rapidly followed, with Google-owner Alphabet recently issuing some $20 billion in debt, including a rare 100-year sterling-denominated bond.

“What if, in three years, these Nvidia chips get outstripped by a Chinese competitor, and I’m lending for five or eight years, and in year three, my data center is obsolete?” he said.

President Donald Trump on Saturday said he would increase global tariffs to 15% from 10%, one day after the Supreme Court struck down his “reciprocal” tariffs.

The new tariffs will be “effective immediately,” Trump said in a Truth Social post.

“I, as President of the United States of America, will be, effective immediately, raising the 10% Worldwide Tariff on Countries, many of which have been “ripping” the U.S. off for decades, without retribution (until I came along!), to the fully allowed, and legally tested, 15% level,” he wrote.

In his social media post Saturday, Trump also warned that additional tariffs would follow.

“During the next short number of months, the Trump Administration will determine and issue the new and legally permissible Tariffs,” he wrote.

The White House did not immediately respond to a CNBC request for comment.

The increase comes after the Supreme Court on Friday, in a 6-3 tariff ruling, decided that Trump wrongfully invoked the International Emergency Economic Powers Act (IEEPA) to implement his levies.

Trump responded the same day with a 10% global tariff, exercising his authority under Section 122 of the Trade Act of 1974. The statute allows the president to implement only temporary levies, with any extension requiring congressional approval.

The president was scathing in his remarks against the Supreme Court decision, calling it in his social media post that it was “ridiculous, poorly written, and extraordinarily anti-American.”

He also attacked Justices Neil Gorsuch and Amy Coney Barrett after they voted with the majority in the ruling.

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