US PPI weak signal, opens the way for Fed rate cuts

Recent US economic indicators released have sent new signals to the market. Financial analysts point out that the weakness in the US PPI( Producer Price Index) increases the likelihood of a slowdown in the CPI( Consumer Price Index) as well. These signals of decelerating inflation are considered important leading indicators that could soon lead to the Federal Reserve’s decision to cut interest rates.

PPI Decline for the First Time in 10 Years, Signaling Inflation Easing

Excluding food and energy, the US PPI has fallen more sharply than in the past 10 years compared to the previous month. This is not just a numerical deterioration but indicates a significant weakening of price pressures at the production stage. Analysts emphasize that this trend could similarly impact consumer prices in the future. The weakness in the US PPI over recent months is interpreted as evidence that the tightening policies are effectively curbing inflation.

CPI Also Misses Expectations, Probability of Rate Cut Rises

The upcoming US CPI data is also expected to fall short of market expectations. In particular, the weakness in PPI provides strong evidence that such an outcome is highly probable. If the CPI also underperforms, it is predicted that the Federal Reserve will very likely implement a 50bp( basis point) rate cut. This would serve as a positive signal for market participants who have been waiting for a rate cut.

Expectation of Upward Momentum in US Stock Markets

The weakening inflation indicators and anticipated monetary easing by the Fed are likely to turn into direct bullish signals for US stock index futures. As the timing of rate cuts becomes more concrete, capital inflows into the stock market could accelerate. With the environment forming where spot prices and futures could rise together, the weakness in the US PPI is also expected to have a significant impact on global financial markets.