Key Insights from the Latest PPI Inflation Report: What It Means for Markets and the Fed
5 Key Takeaways from the Latest U.S. Producer Price Inflation Report
The new U.S. Producer Price Index report brings surprising numbers. It shows changes that spark talks on inflation and Fed policy. Here is a detailed look at the report and its impact on the economy and markets.
Unexpected Decline in Producer Prices
In August, the PPI—measuring wholesale price shifts—fell by 0.1%. This drop marks the third time this year that prices have fallen instead of risen. Many Wall Street experts expected a 0.3% rise. The core PPI, which leaves out food and energy changes, also dropped by 0.1%. In contrast, a core measure that leaves out trade services in its count went up by 0.3%.
Market and Political Reactions
Low inflation numbers now push markets to see a rate cut soon. President Donald Trump said on Truth Social,
"No Inflation!!! ‘Too Late’ must lower the RATE, BIG, right now. Powell is a total disaster, who doesn’t have a clue!!!"
The market showed only slight moves.
- Stocks: Saw small gains after the report.
- Treasury yields: Fell by a little.
Investors now watch closely as the next major report comes.
Inflation Fundamentals Show Good Signs
Policy experts study not only the main inflation number but also the smaller details. Here, the report shows that the service sector—making up about 80% of U.S. GDP—went into a 0.2% drop. The prices of goods, which face more global and tariff effects, increased by only 0.1%. These signs point to a cooling of inflation pressures.
Eyes on Tomorrow’s Consumer Price Index
Investors and policy makers now turn to the Consumer Price Index report. It is set for release on Thursday at 8:30 a.m. ET. The CPI gives a broad look at consumer prices. Along with the PPI, it helps shape the Fed’s view on inflation. Experts expect the CPI to rise around 0.3% in August. This will be the final big inflation data point before the Fed makes a policy choice, and its timing may shape market ideas and policy plans.
Expert Perspectives on the Report
Leading economists now share what they see in the report:
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Chris Larkin, Managing Director at E-Trade:
“Tomorrow’s CPI will carry more weight, but today’s PPI print essentially rolled out the red carpet for a Fed rate cut next week. After last week’s jobs report, the market was already expecting the Fed to begin an easing cycle, so it remains to be seen how much of a near-term impact this will have on sentiment.” -
David Russell, Global Head of Market Strategy at TradeStation:
“The worst-case scenario on inflation isn’t playing out. The doves will be happy to see the year-over-year number back below 3 percent. Combined with the weak jobs data recently, this keeps us on track for rate cuts. However, the speed and intensity might depend more on the big consumer index tomorrow morning.” -
Andrew Hollenhorst, Citigroup Economist:
“Inflationary pressure in PPI appears to be muted overall. We see nothing in this report (or its implications for core PCE) that would dissuade Fed officials from cutting 25 basis points in September and proceeding to cut 25 basis points at each upcoming policy meeting.”
What’s Next?
The report shows a drop in wholesale inflation pressure. With the CPI report close at hand, all eyes stay on the Federal Reserve. Many now expect a cycle of rate cuts after a long period of tightening. The upcoming CPI and future Fed moves will help set the course for the U.S. economy in the months to come.
Stay tuned to CNBC for live updates and expert analysis as more inflation data unfolds and market reactions evolve.
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