US PPI inflation remained mild in May, further boosting expectations for an interest rate cut in September.

A day after US CPI inflation for May came in below expectations across the board, the overall increase in the US Producer Price Index (PPI) for May, released on Thursday, remained mild, suggesting that tariffs have not yet imposed higher inflationary pressure on consumers and further boosting expectations for a US Fed interest rate cut in September.

According to a report issued by the US Bureau of Labor Statistics, the US PPI year-over-year (YoY) rate for May was recorded at 2.6%, in line with market expectations of 2.6%; the US PPI month-over-month (MoM) rate for May was recorded at 0.1%, below the market expectation of 0.2%.

Excluding the more volatile food and energy categories, the core PPI for May rose 3.0% YoY, the lowest level since August 2024 and below the expected 3.1%; it increased 0.1% MoM, below the expected 0.3%.

The PPI measures inflation from the producer's perspective, reflecting the price conditions of goods purchased during the production process. Changes in the PPI can predict future price movements, making this indicator highly valued by the market.

Data showed that wholesale energy prices remained largely unchanged, although gasoline prices rose 1.6% MoM. After a 0.9% decline in April, wholesale food prices rose 0.1% MoM in May. The highly watched price of eggs increased by 1.4%.

Since taking office earlier this year, Trump has imposed a baseline tariff of 10% on all trading partners and varying tariffs on steel, aluminum, and automobiles. US importers will pay these taxes and, where possible, pass them on to consumers through price increases.

Although the current impact of higher tariffs on the US public is not yet significant, economists point out that price pressures may intensify in the second half of the year as companies attempt to avoid further weakening of profit margins.

Stephen Brown, an analyst at Capital Economics, noted that wholesale prices can provide an initial insight into the direction of consumer inflation, as some of its components are used to calculate the Fed's preferred inflation indicator, the PCE data.

Carl Weinberg, chief economist at High Frequency Economics, wrote, "Today's data show that the Fed has no reason to discuss raising interest rates. In fact, if Trump's tariff policies had not been implemented, the Fed might even consider cutting interest rates to stimulate the economy."

Meanwhile, another set of data released by the US Department of Labor showed that the number of initial jobless claims for the week ending June 7, seasonally adjusted, remained steady at 248,000, compared with market expectations of 240,000, the highest level since last October.

The number of continuing jobless claims jumped to 1.951 million, the highest level since November 2021, indicating that it is becoming increasingly difficult for the unemployed to find new jobs.

According to the CME Group's FedWatch Tool, the probability of an interest rate cut in September stood at 80%, up from 70% the previous day.