Trump Rate Hopes Burned as New Inflation Data Comes in Hot
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Producer prices rose sharply in July, federal data shows, dashing President Donald Trump's hopes that the Federal Reserve would cut rates in September as he has been demanding.
The Producer Price Index (PPI) rose by 0.9 percent on the month in July, the U.S.
Bureau of Labor Statistics (BLS) said on Thursday, and by 3.3 percent on the year. Both were much higher readings than markets were expecting.
The PPI measures the output prices for domestic producers of goods and services before they reach consumers.
July's Consumer Price Index had come in milder than expected, fueling a widespread belief that the Federal Reserve will move to cut rates sooner.
But the PPI data suggests that the much-anticipated feedthrough of Trump's tariffs into consumer prices is coming down the line, a fear that has so far deterred the Fed from cutting rates.
Chris Zaccarelli, chief investment officer for Northlight Asset Management, said the "large spike" in PPI "shows inflation is coursing through the economy, even if it hasn't been felt by consumers yet."
"Given how benign the CPI numbers were on Tuesday, this is a most unwelcome surprise to the upside and is likely to unwind some of the optimism of a 'guaranteed' rate cut next month," Zaccarelli said.
This is a breaking news story. Updates to follow.
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