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**June PPI Flat as Fed Rate Cut Odds Hang in Balance Amid Sticky Inflation, Tariff Concerns**
The Producer Price Index (PPI) for final demand remained unchanged in June, seasonally adjusted, according to the U.S. Bureau of Labor Statistics. This follows a 0.3% increase in May and a 0.3% decrease in April. On a 12-month unadjusted basis, the index rose 2.3%.
Within the PPI headline figure, a 0.3% increase in prices for final demand goods was offset by a 0.1% decline in final demand services.
Core PPI—which excludes volatile components like food, energy, and trade services—also held steady in June after inching up 0.1% in May. Over the past year, the core index rose 2.5%.
The data sends mixed inflation signals, which have left financial markets uncertain about the Federal Reserve’s next steps. Analysts are paying particular attention to signs of inflation stemming from tariffs—noticeable now in both durable and nondurable goods—which could pressure the Fed to adjust policy sooner rather than later.
“Inflation has started a slow climb as signs of tariff-induced inflation are now evident within durable and nondurable imports,” said Joe Brusuelas, chief economist at RSM U.S. “That prompts an important question: Will service and housing inflation, which is easing but still elevated, cool further to offset what will be a more pronounced increase in durable and nondurable goods?”
“Our sense is that the Federal Reserve will continue to display patience as the direction of inflation evolves,” he added.
Market expectations for a rate cut in September have recently shifted. According to the CME FedWatch Tool, traders currently assign a 50.5% chance of a quarter-point rate cut at the Fed’s next policy meeting—down from 54.5% earlier in the week. The odds of the Fed leaving rates unchanged now stand at 48.2%, while just 1.3% of market participants are anticipating a more aggressive 0.50% cut.
As for the upcoming July Federal Open Market Committee (FOMC) meeting, markets are nearly certain that the Fed will hold interest rates steady, with a 97% probability currently priced in. Policymakers continue to weigh persistent core inflation, the evolving impact of tariffs, and indications of uneven price increases across the broader economy.
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