US producer prices dip in August, fueling Fed rate-cut hopes

United States wholesale inflation eased in August, strengthening expectations that the Federal Reserve will cut interest rates this month.

Producer prices fell 0.1% last month, pulling annual inflation down to 2.6% from 3.1% in July, according to Bureau of Labor Statistics data. Economists had expected a 0.4% monthly increase.

The surprise drop was driven by a 1.7% fall in trade services, the steepest decline in more than a year, suggesting businesses are absorbing higher costs instead of passing them to consumers.

Excluding volatile items like food, energy and trade services, prices rose 0.3% month-on-month and 2.8% from a year earlier, showing underlying pressures persist.

Markets rallied on the data. S&P 500 futures gained 0.54%, Nasdaq 100 futures rose 0.57%, and two-year Treasury yields fell.

The report signals cooling price pressures at the producer level, boosting investor confidence that the Fed will move ahead with rate cuts later this month.