Producer Inflation Cools, Fed Rate Hike Odds Eased

Producer inflation in the U.S. cooled more than expected in July, according to data released by the Bureau of Labor Statistics on August 13. The Producer Price Index for final demand was flat month over month, below economists' forecast for a 0.2% increase. Annual PPI inflation slowed to 4.7% from 5.5% in June.

The July PPI report showed that prices for final-demand goods fell 0.7%, while services increased 0.2%. Energy was the biggest drag on goods prices, falling 3.1%, while food declined 0.9%. Gasoline prices dropped 5.7% and accounted for more than half of the decrease in final-demand goods.

The data strengthens the case for the Federal Reserve to hold interest rates unchanged at its September meeting. Richmond Fed President Tom Barkin said that whether another rate increase will ultimately be required remains an open question, leaving upcoming inflation, employment, and energy-price data central to the decision.