Wall Street surges along with rate cut odds

Trump just got another win against the Federal Reserve, after new data from the Bureau of Labor Statistics on Wednesday showed that wholesale prices fell by 0.1% in August.

That unexpected drop gave markets a jolt and made an interest rate cut more likely. It followed a revised 0.7% rise in July and was well below the 0.3% increase Wall Street expected. The headline Producer Price Index (PPI) is now up 2.6% over the past year.

The core PPI, which cuts out energy and food, also slipped 0.1%, even though economists had forecast another 0.3% gain.

When food, energy, and trade are all removed, the number shows a 0.3% monthly increase and a 2.8% year-over-year gain. That’s the kind of number that gives the Fed room to cut, especially after months of tough talk on inflation.

Wall Street surges along with rate cut odds

Stock futures jumped, and Treasury yields dipped after the data dropped. Traders reacted fast. According to the CME FedWatch Tool, there’s now a 100% chance the Federal Open Market Committee will cut rates next week.

The last interest rate cut happened in December, right after Trump won his reelection, and while most expect a quarter-point cut, the odds of a bigger half-point cut surged to 11.3% after the report.

The Fed’s meeting is next week, and it’s not just a rate call—it’ll include a full update on how officials see the economy. But the new data is turning the heat up. Services costs, a key part of inflation that the Fed watches closely, fell 0.2%, led by a 1.7% drop in trade services. Wholesale margins for machinery and vehicles plunged 3.9%. That matters. That’s pricing power fading in real time.

Meanwhile, goods prices barely moved, rising just 0.1% overall. Core goods were up 0.3%. Food costs crept up 0.1%, while energy fell 0.4%. It’s flat out there. “Net, net, the inflation shock that was not is rocketing markets higher,” said Chris Rupkey, economist at Fwdbonds, adding, “There is almost nothing to stop an interest rate cut from coming now.”

Trump pressure builds as labor numbers disappoint

The Fed has been dragging its feet all year, blaming Trump’s tariffs for possible inflation threats. But the data’s saying something else. Tobacco prices, which are affected by tariffs, jumped 2.3% in August. But that was one of the few exceptions.

Portfolio management fees, a driver of July’s spike, rose again 2% in August, though down from 5.8% in July. Still, Trump has kept hammering the Fed. He’s pushed for lower rates, arguing that his tariffs aren’t inflationary and that the U.S. needs cheaper borrowing to grow and manage its massive debt.

After Wednesday’s release, he posted on Truth Social, “Just out: No Inflation!!! ‘Too Late’ must lower the RATE, BIG, right now. Powell is a total disaster, who doesn’t have a clue!!! President DJT.”

Meanwhile, the Fed’s labor data headache is growing. A separate BLS report from Tuesday revealed the economy added 1 million fewer jobs than earlier reported in the 12 months leading up to March 2025. That’s a blow. The Fed’s been calling the labor market “solid,” but those numbers don’t back that up.

Even though inflation is still above the Fed’s 2% target, many at the central bank believe it’ll keep falling as housing and wage pressures ease. But with Trump on the offensive, markets turning, and job numbers revised downward, the Fed’s not looking like it’s in control anymore.

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