Economists expect a 0.2% month-on-month increase in August PPI, with the probability of the Fed cutting interest rates by 25 basis points next week exceeding 85%

Zhitong
2024.09.11 22:19
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Economists expect the month-on-month PPI to rise by 0.2% in August, with the probability of the Fed announcing a 25 basis point rate cut at next week's meeting exceeding 85%. Despite the accelerated growth in wholesale prices in August, overall inflationary pressures remain moderate. The year-on-year growth rate of PPI in August is expected to slow from 2.2% to 1.8%. Core PPI and CPI data also indicate a moderate inflation trend. The Fed's annual inflation target is 2%, and PCE data will be released on September 27th

According to the Wise Finance APP, the Federal Reserve is expected to announce a 25 basis point rate cut at next week's meeting based on producer inflation data. Despite expectations for faster wholesale price growth in August than in July, overall inflation pressures remain moderate.

The U.S. Bureau of Labor Statistics will release the Producer Price Index (PPI) for August on Thursday night Beijing time. Economists predict a month-on-month increase of 0.2% in August, higher than July's 0.1%. However, the year-on-year growth rate of PPI is expected to slow from 2.2% last month to 1.8%. Core PPI (excluding food and energy prices) is also expected to rise by 0.2% in August, matching July's increase. The year-on-year growth rate of core PPI is expected to remain at 2.4%.

The agency released the Consumer Price Index (CPI) for August on Wednesday. The data shows that overall CPI rose by 0.2% in August, with a year-on-year increase of 2.5%. Core CPI inflation slightly exceeded expectations, rising by 0.3% month-on-month in August and 3.2% year-on-year, mainly due to a rebound in housing inflation.

The Producer Price Index measures the prices of goods and services at the wholesale level in the United States, ranging from raw materials to finished products. It typically leads the Consumer Price Index because producers often pass on cost increases to consumers.

The Federal Reserve's annual inflation target is 2%, based on the Personal Consumption Expenditures Price Index (PCE). The PCE price index combines elements of CPI and PPI and usually falls between the two. The PCE data for August will be released on September 27.

Economists typically pay special attention to several key components in the PPI basket, which directly affect the PCE price index, including financial services, airfare prices, and medical services.

Since the onset of the COVID-19 pandemic, producer price inflation has shown greater volatility than consumer inflation. In March 2022, the year-on-year growth rate of PPI peaked at 11.6% after the pandemic, falling to below 1% by the end of 2023, and then slightly rebounding this year.

Interest rate futures market data as of Wednesday show that the probability of a 25 basis point rate cut at the Federal Reserve meeting on September 17-18 exceeds 85%. Since July 2023, the Federal Reserve has maintained the federal funds rate target range between 5.25% and 5.5%

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