U.S. PPI Flat in July as Core Indicators Accelerate, Fed Rate Hike Odds Drop to 40%

July U.S. PPI held steady while core final demand rose 0.4% MoM. Hawkish Fed comments persist despite cooling inflation data, pushing September rate hike probability down to roughly 40%.

Woofun AI data shows that the U.S. Producer Price Index remained unchanged month-on-month in July, missing the 0.2% forecast, while the year-on-year figure fell to 4.7%, the lowest since March. Although headline inflation cooled due to energy and food price declines, core final demand PPI accelerated from 0.1% to 0.4% month-on-month, suggesting underlying price pressures remain. Initial jobless claims rose to 209,000, exceeding expectations.

Federal Reserve officials maintained a cautious stance on monetary policy. Cleveland Fed President Loretta Mester argued that current policies are insufficiently restrictive, citing widespread inflation. Richmond Fed President Christopher Waller stated that the decision on rate hikes remains open, noting that entrenched price pressures may necessitate tighter policy or reduced demand. Consequently, market pricing for a September rate hike has adjusted to approximately 40%.