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#July PPI Beats Expectations# The July Producer Price Index (PPI) data for the United States has been released, and it shows that inflation beat expectations. Here are the key figures¹ ²:
- *Year-over-year increase*: The PPI rose by 3.3%, surpassing the predicted 2.5% increase.
- *Month-over-month increase*: The PPI jumped by 0.9%, which is the highest rise since June 2022.
This unexpected surge in PPI has impacted market expectations for the Federal Reserve's interest rate decisions. The likelihood of a 25 basis point rate cut in September has decreased, with markets now pricing in about a 90% probability of a rate cut, down from 97% previously.³
The PPI data has also affected the price of gold, which dropped to $3,336 per troy ounce due to the increased expectations of a more gradual interest rate cut by the Federal Reserve. Additionally, the US dollar index fell by 0.15% to 98.35, and currency pairs like EUR/USD and GBP/USD saw some gains.
*Key drivers of the PPI increase:*
- *Services costs*: Rose by 1.1%, the highest increase since March 2022, contributing to the overall surge in PPI.
The PPI data suggests that inflationary pressures are still present in the economy, which could influence the Federal Reserve's monetary policy decisions in the coming months.