Expectations for Interest Rate Cuts Heat Up Again

On September 10 Eastern Time, data released by the U.S. Bureau of Labor Statistics showed that the U.S. August PPI increased by 2.6% year-on-year, lower than the expected 3.3%, with the previous value at 3.3%; the August PPI fell by 0.1% month-on-month, significantly lower than the expected 0.3%, with the previous value at 0.9%.

The report showed that the U.S. core PPI (excluding food and energy) rose by 2.8% year-on-year in August, also lower than the expected 3.5%, with the previous value at 3.7%; the core PPI fell by 0.1% month-on-month, significantly lower than the expected 0.3%, with the previous value at 0.9%.

According to CME's "FedWatch Tool," the probability of a 25-basis-point rate cut by the Fed in September is currently 90%, while the probability of a 50-basis-point cut has risen to 10%; the probability of a cumulative 25-basis-point cut by October is 20.7%, a cumulative 50-basis-point cut is 71.6%, and a cumulative 75-basis-point cut is 7.7%.

The report indicated that the U.S. August PPI data showed structural divergence: goods prices excluding food and energy rose by 0.3%, mainly due to tariffs. Meanwhile, service costs fell by 0.2%, cushioning overall inflation.

At the same time, the Trump administration is intensifying pressure on the Fed to cut rates as soon as possible. U.S. Treasury Secretary Bessent publicly urged the Fed to reassess its policy stance, citing the latest revised employment data showing that the economic conditions before President Trump took office were much weaker than previously reported.

According to the latest annual employment revision report released by the U.S. Department of Labor, nonfarm payrolls were revised downward by 911,000 for the year ending March this year. This marks the largest downward revision since 2000.

White House Press Secretary Levitt also stated in a declaration: "The Bureau of Labor Statistics has issued the largest data revision in history, proving that Trump’s judgment was correct: the Biden administration’s economic policies are a disaster, and the Bureau of Labor Statistics has also failed."