US producer inflation (PPI) data for August surprised the market by falling to 2.6% year-on-year, well below expectations of 3.3% and the previous month’s reading. On a monthly basis, the figure was still negative at -0.1%, compared to the forecast of a 0.3% increase.
Core PPI was also lower than expected, recording 2.8% YoY and -0.1% MoM. This result was a major relief to the market that had previously been worried about the high producer inflation reading last month.
The data shock immediately pushed the price of Bitcoin past the psychological level of $113,000, with the last trading around $113,200. The rise signaled positive sentiment towards risk assets as investors saw a high likelihood of the Fed cutting interest rates more aggressively.
Following the announcement, derivatives markets showed an increase in bets on monetary easing. CME FedWatch has pegged the probability of a 50 basis point cut at over 10%, while Kalshi is putting a 44% chance of three rate cuts this year.
President Donald Trump has also jumped on the bandwagon, claiming inflation is gone and urging Powell to cut rates “by a large amount” immediately. All eyes are now on tomorrow’s CPI data, a key determinant ahead of next week’s Fed policy meeting.
