U.S. producer prices posted their biggest monthly decline since April 2025, sharply reducing expectations for another Federal Reserve rate hike. Stock futures moved higher after the report, led by gains in technology shares.
US Producer Prices Fall 0.3% as Inflation Pressures Ease
U.S. producer prices unexpectedly fell in June, adding evidence that inflation pressures are cooling and reducing expectations for another Federal Reserve interest rate increase.The Producer Price Index, or PPI, declined 0.3% from May, marking its largest monthly drop since April 2025. Economists had expected prices to remain unchanged. Producer prices were still 5.5% higher than a year earlier, but annual growth slowed from 6% in May, according to the U.S. Bureau of Labor Statistics.
The decline largely reflected lower energy costs. Prices for final-demand goods dropped 1.4%, their sharpest decrease since July 2022, as gasoline prices fell 12%. Energy prices declined 6.4%, while food prices dropped 0.6%.
Services prices increased 0.2%, suggesting that underlying inflation has not disappeared. Core PPI, which excludes food and energy, rose 0.2% for the month and 4.7% from a year earlier.
The government also revised May’s monthly PPI increase down to 0.6%. The latest figures were released by the Bureau of Labor Statistics, not the Fed. The central bank considers inflation data when setting interest rates but does not produce the PPI report.
Prediction-market odds of a July rate increase fell to about 4% after the release, according to the chart shared by The Kobeissi Letter. However, that figure represents traders’ expectations rather than an official Fed forecast. Reuters reported that the softer data signaled easing price pressures, although inflation remained above the Fed’s target.
US Stock Futures Rise After Softer-Than-Expected PPI Report
U.S. stock futures moved higher Wednesday after the PPI report showed a sharper-than-expected decline in wholesale inflation.
Nasdaq 100 futures gained about 0.6% to 0.7% following the release. S&P 500 futures rose around 0.2%, while Dow Jones Industrial Average futures were flat to 0.2% higher, according to Barron’s.
Technology stocks led the early advance as lower inflation reduced concerns that the Fed would need to raise borrowing costs again. Strong corporate earnings and gains among semiconductor companies also supported futures.
However, the initial reaction was positive rather than “parabolic.” Stock performance depends on several factors beyond a single inflation reading, including earnings, interest-rate expectations, oil prices and geopolitical developments. Rising oil prices could also reverse some of June’s improvement in producer inflation during the coming months.
