There are two new sets of information that are expected to have a significant impact on the Federal Reserve’s decision at the upcoming meeting.
In August, the Producer Price Index (PPI) for final demand slipped by 0.1 percent. This reflected a 0.2 percent decrease in prices for final demand services, while prices for final demand goods increased slightly by 0.1 percent. Over the past year, before seasonal adjustment, the final demand index rose by 2.6 percent as of August.
The Producer Price Index (PPI) tracks the typical changes, over time, in prices that domestic producers receive for their goods and services. It includes prices from the initial commercial sale of many products and certain services.
New government data reveals that the U.S. added 911,000 fewer jobs in the year ending March than previously reported, marking a substantial downward revision. This significant update highlights a notable slowdown in the U.S. labor market during 2024. According to the Bureau of Labor Statistics, national employment levels were considerably lower than earlier monthly reports indicated, suggesting that job growth weakened as Joe Biden’s presidency was concluding. This record-breaking revision cuts the initially estimated job gains for April 2024 to March 2025 by roughly half, with monthly hiring averaging about 75,000 fewer jobs than earlier estimates.
The next question concerns the potential impact of these developments. In theory, the new data creates a pathway for interest rate cuts in September, a move that the consensus has been anticipating. The majority also expects additional cuts throughout the remainder of 2025. While we concur with the prospect of an initial reduction, we remain cautious about subsequent cuts. The full effects of tariffs are yet to be fully realized. However, if tariff-related inflationary pressures prove less significant than anticipated, it could pave the way for further rate reductions by the Federal Reserve.