US PPI cools, jobless claims rise, impacting Fed rate hike expectations

The U.S. Producer Price Index (PPI) fell by 0.1% in August, contrasting with the previous month’s 0.7% increase, while initial jobless claims rose slightly above expectations to 199,000. These developments come at a crucial time as market participants assess the likelihood of a Federal Reserve interest rate hike. The cooling in producer prices and the increase in jobless claims have led to a reassessment of the odds for a Fed rate hike, with current market pricing suggesting a decreased likelihood of such a move. The September and October meetings of the Federal Open Market Committee (FOMC) are now being closely watched for any indications of changes in monetary policy. Key Takeaways Market activity suggests that the decrease in the U.S. PPI and rise in jobless claims appear to be consistent with reduced expectations of a Fed rate hike. The probability of a rate hike by the September 2026 FOMC meeting has dropped to 32.5% from 36% over the past 24 hours, and from 44% a week ago. The October meeting also reflects a decrease, with current odds at 44.5%, down from 50% just a day earlier. What to Watch The Federal Reserve’s upcoming meetings in September and October will be pivotal as ...