PPI Meets Expectations, But Rate Hike Odds Rise Ahead of Fed Meeting
The Producer Price Index (PPI) came in as expected for August, but the odds of a rate hike next week have increased due to the upcoming Consumer Price Index (CPI) report. According to the Bureau of Labor Statistics, wholesale prices rose 0.4% in August, matching forecasts.
The PPI numbers are being closely watched ahead of the Federal Open Market Committee's meeting on September 15 and 16. Last month, Federal Reserve Chair Kevin Warsh appeared to keep the rate-hike door open at the Jackson Hole Economic Policy Symposium.
The CME's FedWatch tool now puts the probability of a rate hike between 3.75% and 4% at 70%, up from 62.2% before the PPI numbers were released. The likelihood of rates being unchanged is now at 30%, down from 37.8%.
Economists expect August's CPI to increase 3.4% over the last 12 months, holding steady after a 3.4% increase in July. On a seasonally adjusted basis, CPI is expected to rise 0.4% in August, after increasing 0.1% in July.