US August PPI Rises 0.4% MoM on Energy, Lifting September Rate Hike Odds to 75%
August PPI data revealed energy-driven goods inflation that directly updates the Fed's reaction function. Middle East supply signals transmitted into US producer costs faster than services could offset. The print raises the bar for any dovish pivot at the September FOMC.
BLS data released 13 September showed final demand goods up 1.1% MoM, with diesel fuel prices jumping 24.1% and accounting for over one-third of the goods increase. Final demand services rose only 0.1%, led by transportation costs while trade margins contracted. Core goods ex-food-and-energy advanced 0.4%, but the headline print exceeded consensus and directly feeds into Core PCE calculations.
The move follows documented Brent crude rebounds after August escalations involving Iranian and Israeli actions in the Strait of Hormuz corridor. Primary records from the Energy Information Administration confirm diesel inventories tightened faster than seasonal norms, transmitting into downstream PPI categories. This pattern mirrors 2022 when similar Middle East risk premia preceded sustained US inflation spikes.
Competing interests are clear: US monetary authorities gain from tighter policy signals that anchor expectations, yet higher input costs raise the threshold for sustained growth. Treasury and Fed statements through FOMC minutes show explicit focus on goods-price volatility as a transmission channel from external energy markets.
Tomorrow's CPI release will determine whether the 75% odds materialize into a 25-basis-point hike or a hold. Markets price a 0.3% MoM core print as the dividing line.
FOMC: Will deliver a 25 bp hike on 18 September if Core CPI prints above 0.25% MoM.
Sources (2)
- [1]Primary Source(https://www.bls.gov/news.release/ppi.nr0.htm)
- [2]Supporting Source(https://www.federalreserve.gov/monetarypolicy/files/fomcminutes20240828.pdf)