PPI | Wholesale Inflation Surges, Fed Watchers Eye September

July PPI: Hot Print Signals Tariff Pass-Through; Markets Still Lean to a September Cut

The July Producer Price Index (PPI) printed hotter than expected, reinforcing evidence that tariff-related costs are working through the pipeline. Headline final demand rose 0.9% m/m after a flat June and is up 3.3% y/y. Margins for final demand trade services (wholesalers/retailers) jumped 2.0% m/m and 6.9% y/y, pointing to greater pass-through. Even excluding trade services, wholesale costs increased 0.7% m/m and 2.7% y/y.

• Goods: +0.7% m/m (food +1.4% was the key driver).
• Services: +1.1% m/m after −0.1% in June.
• Core ex-food & energy: +0.9% m/m, +3.7% y/y.
• Super-core (ex-food, energy, trade services): +0.6% m/m, +2.8% y/y.
• Food: +1.4% m/m, +4.2% y/y; Energy: +0.9% m/m, −3.2% y/y.

How This Sets Up the Fed (CME FedWatch)

After the release, Fed funds futures continued to imply a high probability of a 25 bp cut at the September FOMC, while the chance of a larger 50 bp move eased. Traders will refine those odds with August CPI/PPI and July PCE ahead of the September 16–17 meeting. For live probabilities and methodology, see CME’s FedWatch tool.

Context: The Fed will see August CPI/PPI and July PCE before the meeting, which could shift rate expectations.