US Producer Inflation Surges, Fueling Bets of Further Fed Rate Hikes
US producer inflation data released on Thursday showed that prices rose 0.4% month-on-month in August, exceeding market expectations of a 0.3% increase.
The annual producer inflation accelerated to 5.4%, driven by a sharp rise in energy prices and signs of broader cost pass-through across the economy.
This fueled expectations that the Federal Reserve would raise interest rates further to contain renewed inflationary pressures, with money markets pricing in a probability of more than 70% that the Fed would increase rates at its September 16 meeting.
Meanwhile, the European Central Bank increased its three key interest rates by 25 basis points on Thursday and warned that inflation risks remained tilted to the upside, prompting traders to increase bets on further monetary tightening in the euro area.
As a result, gold and silver prices declined sharply, with silver falling 5.5% to $63.62 per ounce and gold declining 1.8% to $4,318.60 per ounce.