Key Facts
• On August 14, July’s U.S. Producer Price Index (PPI) rose 0.9% month-on-month.
• The increase significantly exceeded market expectations.
• The Federal Reserve is unlikely to implement a 0.50% rate cut in September.
• A 0.25% rate cut in September remains the most likely scenario.
• October may see an additional rate cut, according to market predictions.
• PPI growth was driven by rising goods and service prices.
• Tariffs imposed by the Trump administration may pass costs to consumers.
• Inflation could rise moderately by late 2025, per economist Ben Ayers.
• Chicago Fed President Austan Goolsbee noted service price increases unrelated to tariffs.
• Treasury Secretary Janet Besent supports starting with a 0.25% rate cut in September.
Summary
July’s U.S. Producer Price Index (PPI) rose 0.9%, surpassing market expectations and reducing the likelihood of a 0.50% rate cut by the Federal Reserve in September. Instead, a 0.25% rate cut remains the most probable outcome, with potential for an additional cut in October. The PPI increase was driven by higher goods and service prices, with tariffs potentially passing costs to consumers. Economists predict moderate inflation growth by late 2025. Treasury Secretary Janet Besent and Chicago Fed President Austan Goolsbee highlighted service price increases and supported a cautious approach to rate cuts.
