August Producer Prices Mark First Decline in 4 Months as Fed Rate Decision Looms

10:51 AM EDT, 09/10/2025 (MT Newswires) -- US producer prices fell for the first time in four months in August, defying Wall Street's expectations for a rise and possibly giving the Federal Reserve extra leeway to cut interest rates next week.

The producer price index ticked down 0.1% on a seasonally adjusted basis last month, after a downwardly revised 0.7% increase in July, the Bureau of Labor Statistics reported Wednesday. A survey compiled by Bloomberg pointed to a gain of 0.3%.

Wholesale services costs turned negative, falling 0.2% and marking the largest drop since April. Growth in the index for final demand goods slowed to 0.1% from 0.6%.

Food prices within the goods category nearly stalled in August, while energy costs declined 0.4%.

Annually, producer prices growth decelerated to 2.6% in August from the July's pace of 3.1%, lagging analysts' estimate for a 3.3% rise.

Consumer inflation data for August is due on Thursday. The consumer price index is expected to have increased 0.3% sequentially and 2.9% annually last month, according to a Bloomberg-compiled consensus.

Markets are currently pricing in an 88% probability that the Federal Open Market Committee will reduce its benchmark lending rate by a quarter percentage point on Sept. 17, down from 93% on Tuesday. The odds in favor of a 50-basis-point cut rose to 12% from 7%, according to the CME FedWatch tool.

Tuesday's BLS data showed a significant downward revision to jobs growth in the year to March, adding to worries about a cooling labor market and cementing expectations for a series of Fed rate cuts.

"Even if we get an upside surprise to US inflation on Thursday, the Federal Reserve will very likely be cutting interest rates next week and follow up with (25-basis-point) moves in October and December," James Knightley, ING chief international economist in New York, said in report published Tuesday.

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