U.S. wholesale inflation slowed further on an annual basis in August, adding more fuel to expectations of a long-anticipated federal interest rate cut on Sept. 18.

The Bureau of Labor Statistics released its monthly Produce Price Index report on Sept. 12, showing that the seasonally adjusted PPI for final demand increased 1.7% in August on an annual basis, down from a 2.1% gain in July.

source: tradingeconomics.com

August’s year-over-year figure was less than a 2.0% increase estimate from economists, according to FactSet.

Monthly, the PPI rose 0.2%, up from a flat July. The gain was driven by a 0.4% increase in services prices, while goods prices were unchanged amid falling energy prices.

source: tradingeconomics.com

The PPI tracks average price shifts at the wholesale level before they reach consumers.

However, core PPI — which excludes volatile food and energy categories — increased 0.3% in August month-to-month, following a 0.2% decline in July. Year-over-year, core PPI increased 2.4% in August, up from 2.3% in July.

The PPI report came a day after the Bureau issued its Consumer Price Index, which showed that consumer-facing inflation increased 0.2% in August — identical to July, while annual CPI increased 2.5%. The increase for both figures was driven by a rise in the index for shelter.

The U.S. Federal Reserve will hold its next Federal Open Market Committee meeting Sept. 17-18, where consensus expectations are that the central bank will enact its first interest rate change since July 2023, when it last raised it to its current historically high mark.