Unexpectedly, U.S. producer prices remained constant in June as a decline in demand for travel services counterbalanced a tariff-driven increase in the price of commodities like communication and related equipment.
If the decline in service prices continues, it gives optimism that a spike in inflation brought on by tariffs won’t cause widespread price pressures, enabling the Fed to start lowering interest rates later this year.
However, the Labor Department’s data on Wednesday’s rise in producer goods prices was the most recent sign that President Donald Trump’s broad tariffs, which were announced in April, were beginning to reduce inflation. The government announced on Tuesday that tariff-sensitive categories saw strong increases in June, which saw the Consumer Price Index jump by the most in five months.
The “Monthly change in US Producer Price Index” column chart shows the indicator’s movement over the previous 12 months.
The “Monthly change in US Producer Price Index” column chart shows the indicator’s movement over the previous 12 months.
At its policy meeting on July 29–30, the U.S. central bank is expected to maintain its benchmark overnight interest rate between 4.25% to 4.50%, according to the data. Only “a couple” of officials stated they believed rates could drop as soon as this month, according to minutes of the Fed’s meeting last month that were released last week.
Trump has insisted that the Fed immediately begin reducing borrowing costs. Financial markets were alarmed when Bloomberg reported on Wednesday that Trump was likely to fire Fed Chair Jerome Powell shortly. However, the president later assured reporters that he had no plans to do so.
Following an upwardly corrected 0.3% increase in May, the PPI for final demand last month showed no change, according to the Labor Department’s Bureau of Labor Statistics. Following a previously reported 0.1% advance in May, Reuters polled economists who predicted the PPI would increase by 0.2%.
