Fed seen on course for rate cuts after PPI data

(Reuters) - The Federal Reserve is likely to start a series of interest-rate cuts next week and keep going through the end of the year, traders bet on Wednesday after tamer-than-expected producer price inflation last month calmed worries that price pressures would hold the central bank back from policy easing.

Traders stuck to bets the Fed will start with a quarter-point reduction at its meeting next week, and continue with same-sized cuts through year-end, based on pricing of futures contracts that settle to the Fed's policy rate. The producer price index?increased 2.6% in August from a year earlier, a government report showed, after climbing 3.1% in July.

President Donald Trump took to social media shortly after the report to call for a "big" and immediate interest-rate cut, a move he has repeatedly pressed the Fed to take.

Analysts said they continue to expect Trump's tariffs to push up inflation in coming months, calling the wisdom of a large rate cut into question at least for now. That's particularly so with September consumer price inflation - due Thursday - expected to come in well above the Fed's 2% target.

"Producers do not seem to be facing major inflationary pressure as of now, but consumer prices will be more important to the Fed decision," wrote Scott Helfstein, head of investment strategy at Global X. The slowdown in producer price inflation could signal a softening economy, he said, and while "the Fed is likely to take notice (it) will still likely deliver a modest rate cut in September."?

(Reporting by Ann Saphir; Editing by Tomasz Janowski and Andrea Ricci)