U.S. August PPI MoM growth rate exceeds expectations, Fed rate cut of 25 basis points imminent?

According to the latest report released by the U.S. Bureau of Labor Statistics on Thursday, the Producer Price Index (PPI) for August increased by 0.2% month-on-month, compared to no change in July and an expected increase of 0.1%. The slight rebound in August's U.S. PPI from the previous month's data adjustment further indicates that inflationary pressures are easing. Compared to the same period last year, the August PPI rose by 1.7%, the lowest level since early 2024. In August, the core PPI, which excludes the volatile food and energy categories, increased by 0.3% month-on-month and 2.4% year-on-year. Due to investors continuing to bet that the Federal Reserve will cut interest rates by a quarter point at the upcoming meeting next week, stock index futures and U.S. Treasury yields remained almost unchanged after the data release. Following the slightly higher-than-expected CPI and PPI figures, the market's strong call for a 50 basis point rate cut since August has almost disappeared. The rate futures market and the U.S. bond market are almost 100% pricing in the expectation of a 25 basis point rate cut by the Federal Reserve in September, marking the first rate cut since the Fed's current rate hike cycle. Wholesale inflation data closely follows the more closely watched Consumer Price Index. The CPI data shows that basic inflation accelerated in August due to rising housing costs. However, as cost pressures on the economy have weakened in recent months, Federal Reserve policymakers are expected to start cutting rates next week amid concerns about the sustainability of the labor market. The PPI report shows that service costs rose by 0.4%, with rent increases being listed as a "major factor" by the Bureau of Labor Statistics. Last month, commodity prices remained unchanged, influenced by significant declines in energy costs. Excluding food, energy, and trade (many economists' preferred less volatile indicators), prices rose for the second consecutive month by 0.3%. Compared to a year ago, this index has risen by 3.3%. Economists also analyzed the PPI data to identify the inflation indicators favored by the Federal Reserve—the Personal Consumption Expenditures Price Index. These data are generally moderate. The PCE price index for August will be released later this month. In these categories, portfolio management fees, doctor care costs, and hospital care costs remained unchanged, while airline ticket prices fell by 0.8% due to adjustments by airlines to accommodate cooler discretionary travel spending. The cost of intermediate demand processed goods, reflecting early-stage prices in the production process, decreased by 0.1%