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When investors and economists think about the start of a Federal Reserve meeting for interest rates, they generally think of unemployment and inflation in their mix about how the decision will go. It is no secret that the unemployment rate is easily at the Fed’s threshold, if not better. What still remains a debate is the inflation picture. If the Fed can get inflation up to the 2.0% to 2.5% target, then it can easily justify its quest to keep normalizing interest rates with rate hikes.

The Bureau of Labor Statistics (BLS) released its reading on the Producer Price Index (PPI) for final demand in the month of November. Headline PPI was up 0.4% from October, and the core PPI (excluding food and energy) was up 0.3%. Dow Jones was calling for a gain of 0.3% on the headline number and a gain of 0.2% on the core reading.

Monthly readings rarely sound like they are anywhere close to “hot” on inflation, but the annualized numbers are what the Federal Reserve and economists have to focus on for annualized inflation.

The final demand index inside of PPI rose by 3.1% for the 12 months ended in November, and this was the largest annualized gain since the same 3.1% gain was recorded back in January of 2012. For the 12 months ended in November, prices for final demand in the core (again, sans food and energy — and trade services) rose by 2.4%.

While these inflationary readings seem high, the BLS reported in its data that a 15.8% jump in the price of gasoline accounted for more than two-thirds of the November increase in the index for final demand goods.

There are always areas seeing higher and lower prices throughout the monthly cycles. The rising components of the indexes were seen in light motor trucks, pharmaceutical preparations, beef and veal, residential electric power, and in jet fuel. Prices were lower in processed young chickens, ethanol, and commercial electric power.

Any time investors see a higher inflationary reading they tend to get a little spooked. The reality is that the Consumer price Index (CPI) is where you have to see real inflation for consumers to worry. Businesses can see a big price rotation and their consumer prices may already be fixed, and then there is the notion that businesses just have a harder time passing higher costs on down to consumers when they have so many choices to choose from now.

With most of the gains being tied to energy and oil prices, a lot of the data may be given a pass here due to the supply issues around oil. Whether that can hold remains to be seen, but higher oil prices have generally been considered an invitation to increase production by too much — and that just acts to cap oil prices.

The CME’s FedWatch Tool is still predicting an 87.6% chance of a rate hike at this week’s Federal Open Market Committee meeting. That percentage had been 90% a week or so earlier, but most market participants believe that the federal funds rate is going to get hiked to a range of 1.25% to 1.50% from the current 1.00% to 1.25%.

Stay tuned.