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By Shane Croucher
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Producer prices rose sharply in July, federal data shows, dashing President Donald Trump's hopes that the Federal Reserve would cut rates in September as he has been demanding.
But the White House was unmoved by the latest data, with spokesman Kush Desai telling Newsweek in a statement that "the doom-and-gloom predictions of President Trump's tariffs ratcheting up inflation continue to be proven flat-out wrong."
Why It Matters
Trump believes interest rates are needlessly high and has skirted traditional norms on central bank independence to sharply criticize Fed Chair Jerome Powell and the institution for not slashing borrowing costs, accusing them of damaging the economy.
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The Fed is closely watching inflation data before it moves to cut rates, fearing a looming spike in prices related to Trump's tariffs. The latest data weakens the case for cutting rates as Trump wants.
What To Know
The Producer Price Index (PPI) rose by 0.9 percent on the month in July, the U.S. Bureau of Labor Statistics (BLS) said on Thursday, and by 3.3 percent on the year. Both were much higher readings than the markets were expecting.
The monthly rise was the biggest since June 2022, and the annual increase the highest since February this year. Core PPI, which strips out volatile data points, rose by 3.7 percent over the year, its highest annual rise since April 2021.
The PPI measures the output prices for domestic producers of goods and services before they reach consumers.
July's Consumer Price Index (CPI) had come in milder than expected, fueling a widespread belief that the Federal Reserve would move to cut rates sooner.
But the PPI data suggests that the much-anticipated feedthrough of Trump's tariffs into consumer prices is coming down the line, a fear that has so far deterred the Fed from cutting rates.
The White House, however, pointed to the consumer price data and said core PPI figures for 2025 were still favorable, pointing to the annualized rate since January, when Trump took office.
"With the consumer price index running at an annualized rate not seen in over four years and PPI for core goods—which would be most sensitive to tariffs—now down at a 0.7 percent annualized rate since January, the doom-and-gloom predictions of President Trump's tariffs ratcheting up inflation continue to be proven flat-out wrong," White House spokesman Kush Desai told Newsweek.
"The Trump administration's policies swiftly put an end to Joe Biden's inflation crisis, and as trillions in investments pour into the United States, they're now laying the groundwork for a long-term economic resurgence for the American people."
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What People Are Saying
Chris Zaccarelli, chief investment officer for Northlight Asset Management, said the "large spike" in PPI "shows inflation is coursing through the economy, even if it hasn't been felt by consumers yet. Given how benign the CPI numbers were on Tuesday, this is a most unwelcome surprise to the upside and is likely to unwind some of the optimism of a 'guaranteed' rate cut next month."
Liz Thomas, head of investment strategy at SoFi, posted to X: "The increase in PPI was driven by services, and there were increases in general services costs *and* in the Trade component (i.e. wholesale/retail margins). The Fed won't like this report."
Christopher Rupkey, chief economist at fwdbonds, said: "It will only be a matter of time before producers pass their higher tariff-related costs onto the backs of inflation-weary consumers."
What Happens Next
The Federal Open Market Committee will meet on September 19 to discuss the state of the economy and make a decision on its key interest rate, which is currently set at a target range of 4.25 to 4.5 percent. It will have more inflation and jobs data for August by then.
Update, 8/14/25, 11:50 a.m. ET: This article was updated with a comment from the White House.
Update 8/14/25, 9:50 a.m. ET: This article was updated with more information.
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