Wholesale Inflation Holds Steady, Rate Cut Bets Climb Above 80%

September's Producer Price Index report is finally here... after a 2-month delay. 

The data, initially scheduled for an October release, lands at a critical moment for Fed policy expectations. After the longest government shutdown in U.S. history, Federal agencies are finally back to the backlog of delayed economic reports, giving markets long‑awaited clarity on inflation trends.

PPI Report

• Headline PPI (MoM): 0.3% - Expected: 0.3%

• Headline PPI (YoY): 2.7% - Expected: 2.7% 

• Core PPI (MoM): 0.1% - Expected: 0.2%

• Core PPI (YoY): 2.6% - Expected: 2.7%

Overall, producer‑level inflation remained stable in September, growing 0.3% in September, at the wholesale level. The data reveal that PPI inflation was less of a problem than previously assessed. As one of the last pieces of data the Fed will gain access to before the Dec. 10 FOMC meeting, the report is likely to maintain high interest rate cut expectations.

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Fed Rate Cut Odds on The Rise

While for most of September, expectations of monetary easing went down as Committee members weighed in on the impact of the Government shutdown, the story flipped last Friday. On that date, NY Fed President John Williams signaled there was still room for rate cuts in December, sparking a sharp reversal in market expectations.

As of right now, futures tied to the Fed decision show odds of a cut to 3.76-3.50% above 80%. 

Tomorrow, and even more impactful inflation print is coming out. On Wednesday, the BEA will release the numbers for the Core Personal Consumption Expenditures (PCE) Price Index for September, the Federal Reserve's preferred inflation gauge. 

Investors in speculative markets like crypto and stocks have become even more reactive to Fed expectations over the last data rounds. In the likelihood that rate cut expectations continue to rise until December 10, investors are likely to continue adopting a less strict stance on risk assets, which could translate into sustained inflows into equities, high‑yield credit, and digital assets.