June PPI, CPI Point to Cooling Inflation as Markets Lift September Fed Hike Bets

Fresh inflation data for June reinforced signs that price pressures are easing across the U.S. economy. The Producer Price Index (PPI) fell 0.3% month over month, reversing May's 1.1% increase, while the 12-month PPI rate came in at 5.5%. Consumer inflation also moderated. The Consumer Price Index (CPI) declined 0.4% on the month and rose 3.5% year over year. Investors largely attributed the softer readings to falling energy prices, which helped pull overall inflation lower. Even with the cooler prints, market pricing has shifted toward higher odds of additional tightening. The implied probability of a rate hike by the Federal Reserve's September meeting climbed to 58.5%, up from 34% a week ago. Expectations for an October hike also increased, with odds rising to 64.5%. Commentary from Tom Lee tracked the change in market sentiment: while some analysts argue easing inflation could reduce the need for near-term hikes, traders appear to be keeping a meaningful chance of further rate increases on the table. Key Takeaways - June data suggest inflation is weakening in both PPI and CPI, with notable monthly declines. - Markets have lifted expectations for a September Fed hike, with odds up to 58.5%. - Tom Lee's view aligns with a market that still sees potential hikes despite cooling inflation. What to Watch Attention now turns to the Fed's September and October meetings for signals on the next move in rates. Jerome Powell's remarks and upcoming FOMC minutes will be closely parsed for policy guidance. Investors will also monitor core inflation measures and labor-market conditions, both of which could reshape expectations for further tightening. Get live prediction-market analysis, powered by Vera. Sign up for Vera.