U.S. Producer Prices Cool Again in May — Inflation Eases, Rate Cut Hopes Rise

The latest U.S. Producer Price Index (PPI) data released today, June 12, 2025, shows that wholesale inflation remains under control—offering a sigh of relief for markets and fueling expectations of a Federal Reserve pivot later this year.

Headline Numbers:

• PPI rose just 0.1% month-over-month in May, below expectations of 0.2%.
• Core PPI, which excludes food and energy, also increased 0.1%, missing the 0.3% forecast.
• Year-over-year PPI came in at 2.6%, slightly up from April’s 2.5% but still modest and within the Fed’s comfort zone.

Why It Matters:

The PPI measures inflation at the producer level, which often trickles down to consumers. When PPI rises slowly, it signals that consumer price inflation may also cool—something the Federal Reserve is watching closely.

May’s soft print follows an unexpected dip in April (–0.2%) and strengthens the case that inflationary pressures are easing. Traders are now increasing bets that the Fed may begin cutting rates as early as September, especially with jobless claims also ticking higher this week.

Market Reaction:

• Stock futures were flat to slightly higher.
• Treasury yields fell, with the 10-year yield dipping below 4.30%.
• The U.S. dollar (DXY) weakened modestly, reflecting reduced rate hike expectations.

What’s Next?

While the Fed held rates steady at its June meeting, officials signaled a “wait and see” stance. Today’s data adds to the growing evidence that the next move might be down—not up.

For retail investors, this could signal opportunity in rate-sensitive sectors like tech and real estate, and continued strength in equities if rate cut bets solidify.