U.S. Wholesale Inflation Cools as Trump Presses for Big Rate Cut
Trump wasted no time responding. “NO inflation!!! ‘Too Late’ Powell must slash rates—BIG and NOW! Total disaster. No clue."
Quick overview
- Wholesale inflation in the U.S. slowed more than expected in August, with the Producer Price Index rising 2.6% year-over-year and a 0.1% monthly decline.
- Markets are now anticipating possibly three rate cuts by the Federal Reserve before the end of 2025, with an 88% probability of a quarter-point cut at the upcoming FOMC meeting.
- Core PPI eased by 0.1% from July, and President Trump criticized Fed Chair Jerome Powell, calling for immediate and significant rate cuts.
- Investors are increasingly pricing in at least two cuts for the remainder of 2025, with a 72% likelihood of another quarter-point reduction in October.
Wholesale inflation in the United States slowed more than expected in August, bolstering bets that the Federal Reserve will accelerate its rate-cutting cycle. The Producer Price Index (PPI) rose 2.6% year-over-year and posted a 0.1% monthly decline—well below analysts’ forecasts.
Markets now see not just two, but possibly three cuts before year-end 2025.
The Labor Department report also showed core PPI easing 0.1% from July and rising 2.8% from a year earlier. July’s figures were revised lower, helping ease concerns about the inflationary impact of tariffs imposed by President Donald Trump starting last month. Investors will get a fuller picture Thursday with the release of consumer price data.
Trump wasted no time responding. “NO inflation!!! ‘Too Late’ Powell must slash rates—BIG and NOW! Total disaster. No clue,” the president wrote on his social media account, repeating his attacks on Fed Chair Jerome Powell.
Certainty of a Cut, Uncertainty on Magnitude
“The report is positive and gives the Fed a green light to cut rates next week,” said Cooper Howard, fixed income strategist at the Schwab Center for Financial Research. The debate is no longer whether the Fed will cut, but by how much—25 or 50 basis points.
Markets are assigning an 88% probability to a quarter-point cut at the September 17 FOMC meeting, and a 12% chance of a half-point move, according to CME’s FedWatch tool. Looking ahead, investors price in a 72% likelihood of another quarter-point reduction at the October 29 meeting, which would bring the federal funds target range down to 3.75%–4.00%.
Overall, futures now fully price in at least two cuts for the rest of 2025, with rising odds of a third in December. A 50-basis-point move would be unusual—and historically tied to looming crises, policy missteps, or political pressure, as seen in 2024.
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