The U.S. Bureau of Labor Statistics (BLS) released the August Producer Price Index (PPI) report on the evening of September 10. The PPI data was lower than expected, indicating that U.S. inflation is still slowing.
Specifically, the U.S. PPI data for August is:
- The overall PPI increased by 2.6% year-on-year, lower than the market expectation of 3.3% and lower than the previous value of 3.3%, indicating that the annual growth rate of producer prices has slowed down.
- The overall PPI fell by 0.1% month-on-month, which was not only lower than the expected growth of 0.3%, but also fell sharply from the previous value of 0.9%, creating a rare negative growth in recent times.
- Core PPI year-on-year: increased by 2.8%, lower than the expected 3.5% and the previous value of 3.7%, indicating that the underlying inflation pressure has weakened.
- Core PPI fell by 0.1% month-on-month, which was also lower than the expected 0.3% and the previous value of 0.9%, the largest monthly decline in the past 10 years.
Slowing inflation boosts expectations of rate cuts
The August PPI data fell short of expectations, reflecting a significant easing of supply chain price pressures. Analysts point out that the PPI, a leading indicator of the Consumer Price Index (CPI), fell significantly short of expectations, suggesting that the August CPI data, due on September 11th, may also fall short of market expectations. This provides greater leeway for the Federal Reserve to resume interest rate cuts at its FOMC meeting mid-month. Adam Button, an analyst at the US financial website InvestingLive, commented :
The lower-than-expected PPI data in August is a strong signal that inflation is cooling, and the CPI report to be released on September 11 may also be lower than expected.
He also noted that the core PPI saw its largest month-over-month decline in the past decade, highlighting a significant easing of inflationary pressures. If the CPI data also falls significantly below expectations, the likelihood of a 50 basis point rate cut by the Federal Reserve will increase significantly.
According to the CME FedWatch tool, the market is currently betting that the probability of the Fed restarting a 1 basis point interest rate cut this month is 89.8%, which is slightly lower than before. However, it is worth noting that this does not mean that the market is betting that the probability of the Fed continuing to stand pat has increased, but rather that the market has begun to increase its expectations that the Fed will cut interest rates by 2 basis points at one time this month. The current probability has risen from 7% 1 day ago to 10.2%.
Trump again calls on Powell to cut interest rates
After the data came out, Trump, who has repeatedly stressed the need for interest rate cuts in the United States, issued another statement, saying that without inflation, the Federal Reserve should significantly lower interest rates:
Just released: No inflation! It's "too late" and interest rates must be lowered immediately and significantly. Powell is a complete disaster and has no clue!
Bitcoin and Ethereum rose
Influenced by this news, Bitcoin rose sharply, breaking through $113,000 in one fell swoop. At the time of writing, it was temporarily reported at $113,620, with a 2.45% increase in the past 24 hours; Ethereum followed suit, and was temporarily reported at $4,383 at the time of writing, up 2.26% in the past 24 hours.
