US producer prices delivered a mixed picture in August, but they moved the odds on the Federal Reserve. The headline index rose 0.4 percent on the month, exactly as forecast, while the annual rate climbed to 5.4 percent from a revised 4.8 percent in July: above the 5.3 percent consensus and the highest reading of 2026. Core PPI, which strips out food and energy, came in at 0.2 percent on the month against a 0.3 percent forecast, with its annual rate at 4.6 percent from 4.3 percent. The Bureau of Labor Statistics released the figures on Sept. 10.
Energy did the heavy lifting
The headline move rests almost entirely on energy: final-demand energy prices rose 4.2 percent on the month and diesel fuel alone jumped 24.1 percent, more than a third of the increase in goods prices. Goods rose 1.1 percent, ending two consecutive monthly declines, while services managed just 0.1 percent. Away from energy one hotspot remains tied to artificial intelligence: electronic components climbed 3.4 percent on the month and 27.6 percent over 12 months. Further up the supply chain, processed goods for intermediate demand rose 1.8 percent in the month and 11.5 percent on the year.
Fed odds: from 64 to 70 percent
Markets reacted immediately. According to CME FedWatch data cited by CNN, the probability of a rate hike at the Sept. 15-16 FOMC rose to 70 percent from 64 percent after the release. investingLive, which tracks fed funds futures, stood at 64 percent in its mid-morning reading and flagged a stronger dollar. Treasury yields rose, the dollar firmed and Brent crude pushed above $105 a barrel for the first time since late May. Fed Governor Christopher Waller has said stubborn inflation would push him to "consider a rate hike", though he would otherwise favour holding. The Fed's inflation target is 2 percent.
