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Hot PPI Data Keeps Fed on Track for Smaller Rate Cut

Levi Farrer by Levi Farrer
August 14, 2025
in Economics
Hot PPI Data Keeps Fed on Track for Smaller Rate Cut

The Federal Reserve now faces no chance of implementing a half-point interest rate cut in September because US wholesale prices exceeded expectations during July. The market continues to predict two consecutive interest rate reductions of 0.25 percentage points starting with September and continuing into October.

The Labor Department announced that producer prices increased 0.9% during July because of rising costs in machinery wholesaling and freight services. The rise in wholesale prices according to economists will eventually impact consumer prices because of the upcoming implementation of President Donald Trump’s trade tariffs.

Ben Ayers from Nationwide predicts that inflation will experience a moderate increase during the second half of 2025 because businesses will start passing their rising costs to customers. Chicago Fed President Austan Goolsbee expressed his worry about services inflation showing signs of lasting longer.

The data release eliminated any possibility of a half-point interest rate reduction because traders had assigned only a 3% probability before the announcement.

Tags: Fed
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