US Producer Prices Unchanged in July, Markets See Lower Odds of September Fed Hike

US wholesale inflation cooled further in July, offering investors fresh evidence that price pressures are easing. The Producer Price Index (PPI) for final demand was flat from the prior month, the Bureau of Labor Statistics said Aug. 13, undershooting economists' expectations for a 0.1% to 0.2% increase. July's standstill followed a revised 0.1% decline in June, the steepest monthly drop in 14 months. Goods prices pulled lower, while services stayed firm Final demand goods prices fell 0.7%, led by a sharp drop in energy costs. Services moved in the opposite direction, rising 0.2%. Construction costs climbed 2.2%. On a year-over-year basis, producer inflation eased more clearly. Headline PPI rose 4.7% from a year earlier, down from 5.5% in June and below the roughly 4.9% consensus forecast. It was the lowest annual reading since March and extended the broader cooling trend in wholesale inflation that has been building through 2026. Core measures excluding food and energy also pointed to moderation. Markets trim the case for another Fed move Rate expectations shifted after the release. Ahead of the data, traders had priced about a 40.6% chance of a rate increase at the Sept. 15–16 meeting. Afterward, the implied probability fell to 32.4%. The odds of the Federal Reserve holding the federal funds rate in its current 3.50% to 3.75% range rose to about 67.6%. Labor signals steady; CPI up next Weekly jobless claims edged higher but remained consistent with a resilient labor market. Attention now turns to the upcoming consumer price index report for signs that easing cost pressures at the wholesale level are carrying through to retail prices. Producer prices track what businesses pay before those costs are passed on to consumers. A flat PPI does not guarantee a soft CPI, but it reduces one potential source of upward pressure.