Wholesale Inflation Rises Less Than Expected to 2.2%

U.S. producer prices increased less than expected in July as a rise in the cost of goods was tempered by cheaper services, indicating that inflation continued to be moderate.

The producer price index for final demand gained 0.1% last month after rising by an unrevised 0.2% in June, the Labor Department's Bureau of Labor Statistics said on Tuesday. Economists polled by Reuters had forecast the PPI gaining 0.2%.

In the 12 months through July, the PPI increased 2.2% after climbing 2.7% in June.

Slowing inflation and a cooling labor market have led financial markets to anticipate that the Federal Reserve will start its easing cycle in September. With the U.S. central bank now increasingly concerned about labor market weakness, after the unemployment rate surged to near a three-year high of 4.3% in July, a rate cut of 50 basis points cannot be ruled out.

The Fed has maintained its benchmark overnight interest rate in the current 5.25%-5.50% range for a year, having raised it by 525 basis points in 2022 and 2023.