USA's PPI remained unchanged in September, with the decrease in gasoline prices suppressing the price increase, indicating that inflation is further easing, supporting the view that the Fed will cut interest rates again next month.

A report released by the US Bureau of Labor Statistics on Friday showed that the month-on-month growth rate of the PPI in September was the same as in August, with the index previously rising by 0.2% month-on-month in August. The year-on-year increase in September's PPI was 1.8%, the smallest since February of this year.

Many economists prefer to use an indicator with lower volatility to exclude the impact of food, energy, and trade. This indicator rose by 0.1%, the smallest increase since May 2023.

PPI data is released shortly after the more closely watched CPI data, which shows that driven by rising housing, food, and clothing prices, September's CPI inflation is slightly above expectations.

Fed officials will consider these two reports when planning their path to lower interest rates. Economists often analyze categories related to the Fed's preferred inflation measure (PCE Price Index) in PPI data, though the performance of these categories is mixed.

The September PPI report shows that doctor care and hospital outpatient fees remained almost unchanged, while airfare prices rebounded significantly. Portfolio management fees increased slightly. Service costs rose by 0.2%, slowing down from the 0.4% increase in the previous month. Wholesale food prices rose by 1%, the largest increase since February, while energy prices fell by 2.7%.

The September PCE Price Index will be published later this month.

After the release of the PPI data, the yield of U.S. Treasuries continued to rise, with traders expecting the Fed to cut interest rates by 25 basis points next month.

The Fed initiated rate cuts last month, reducing rates by 50 basis points. Prior to this, inflation had cooled for several months, and wage growth had slowed. Subsequently, reports showed a significant increase in employment positions, with price pressures persisting, prompting economists to lower their rate cut expectations for November to 25 basis points.

The PPI report shows that service costs rose by 0.2%, lower than the previous month's 0.4% increase. Prices excluding food and energy rose by 0.2% for the third consecutive month. Food wholesale prices rose by 1%, marking the largest increase since February this year, while energy prices fell by 2.7%. Processing costs for intermediate demand goods decreased by 0.8%, mainly due to a significant drop in diesel fuel prices.

Futures contracts betting on the Fed's policy interest rate continue to suggest that there is only a 15% chance that the Fed will maintain the short-term lending rate target at the current range of 4.75% - 5.00% at the beginning of November. Most are betting that the Fed will cut rates at the last two meetings of this year and the initial meetings next year, eventually reaching a range of 3.50% - 3.75% by mid-next year.

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