US PPI Inflation Rises 0.2% in August Amid Fed Rate Cut Speculation

• This important inflationary gauge comes amid increasing speculations in anticipation of a rate cut.
• Aside from food and energy, the released data shows the US core PPI increased by 0.3%.

The data from the United States Bureau of Labor Statistics, released on Thursday, show that the US PPI inflation increased 0.2% in August. This aligns with the Dow Jones consensus estimate teased before the readings came out. This important inflationary gauge comes amid increasing speculations in anticipation of a rate cut by the Federal Reserve.

The Producer Price Index measures the final demand goods and services costs that producers receive. Aside from food and energy, the released data shows the US Core PPI increased by 0.3%, which is a little higher than the 0.2% consensus estimate. Noteworthy, this core increase remained the same even when trade services were excluded.

Rate Cut Likely by Fed

Based on 12-month trends, the headline US PPI saw a 1.7% increase. Similarly, the annual rate hit 3.3%, excluding food, energy and trade. Service prices contributed significantly to the PPI measure, with as much as a 0.4% monthly increase. This came from services like trade, transportation and warehousing. Guestroom rental with a 4.8% surge, was also a major contributor to the metric.

Chris Larkin, managing director of trading and investing for E-Trade at Morgan Stanley noted that the alignment of PPI’s repetition of yesterday’s US CPI inflation reading as well as its jobless claims with expectations, clears the decks for the Fed to kick off a rate-cutting cycle.

The markets are anticipating an initial 0.25% cut, but the discussion will soon turn to how far and fast the Fed is likely to trim rates over time, he added. At the time of writing, Bitcoin is trading at $58,237 as per data from CMC.

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