Producer inflation came in well below expectations in June, reinforcing market expectations that the Federal Reserve will keep interest rates unchanged this month.

The Producer Price Index (PPI) fell 0.3% month-over-month in June, below the flat monthly reading economists expected and a sharp reversal from May’s downwardly revised 0.6% surge. It marks the lowest monthly print since April 2025.

The annual producer inflation rate eased to 5.5%, from a downwardly revised 6.0%, versus the 6.2% consensus.

Core PPI, which strips out food and energy, 0.2% on the month against the 0.4% expected, with the annual core rate eased from 4.9% to 4.7%. Economists had penciled in a pickup to 5.2%.

The cooling-than-expected print lands a day after June consumer inflation fell 0.4% month over month, the biggest monthly decline since April 2020, dragging annual CPI down to 3.5% from 4.2% as energy prices dropped 5.7%, with core CPI flat on the month and up 2.6% year over year, a report that pushed July hold probabilities to over 90%.

This is a developing story…