US Producer Price Index (PPI) unchanged in July; Sep rate-hike odds fall as inflation eases
The US Producer Price Index (PPI) for final demand was unchanged in July, under economists’ expectations. This follows a revised 0.1% decline in June (the biggest monthly drop in 14 months).
On a monthly basis, goods prices fell 0.7%, helped by lower energy costs. Services were less disinflationary, rising 0.2%, while construction costs jumped 2.2%. Year-over-year, the Producer Price Index (PPI) fell to 4.7% from 5.5% in June, below forecasts of about 4.9%—the lowest annual rate since March, extending an easing trend in wholesale inflation through 2026.
Markets recalibrated Fed expectations. Before the release, traders assigned about 40.6% odds to a September (15–16) rate hike; after the report, odds fell to 32.4%. The probability of the Fed holding the federal funds rate at 3.50%–3.75% rose to about 67.6%.
The report also sets up scrutiny for the upcoming CPI release, since PPI measures costs paid by businesses before they can flow into consumer prices. Jobless claims increased modestly but stayed consistent with resilient labor conditions, supporting the view that disinflation is progressing without a sharp labor shock.
Neutral
US Producer Price Index (PPI) in July staying flat and the year-over-year easing to 4.7% reduce one source of upward pressure on inflation. That typically supports broad risk sentiment (often mildly bullish for crypto) because lower wholesale inflation can feed into softer CPI readings later. However, the report also shows services inflation ticking up (0.2%) and construction costs surging (2.2%), which can limit how far traders swing toward a dovish pivot.
In the short term, this likely reinforces a “hold rates” scenario, which can improve liquidity expectations and support higher-duration assets like crypto. In the longer term, the market reaction will depend on whether the upcoming CPI confirms that PPI moderation is passing through to retail prices. Similar past episodes show that when PPI/CPI confirm disinflation without a labor shock, risk assets tend to stabilize and recover; but if services re-accelerate or CPI surprises higher, rate-cut optimism often reverses quickly.
Overall, the data is constructive for macro, but mixed components and the dependency on CPI keep the net trading impulse more balanced than one-sided.