Futures Soar as Easing Inflation Fuels Hopes for Fed Rate Cuts

U.S. stock index futures hit pre-market highs after a key producer price index (PPI) report for July showed a smaller-than-expected increase, buoying optimism that inflation is easing and the Federal Reserve may soon cut interest rates. S&P 500 futures rose 0.6%, while another index climbed 0.8%.
According to data released by the U.S. Bureau of Labor Statistics on August 13, the PPI for final demand increased by 2.2% year-over-year in July, below the 2.3% estimate and down from 2.6% in June. On a month-to-month basis, PPI rose by 0.1%, falling short of the expected 0.2% rise, and it matched the previous month's 0.2% increase.
The July PPI data underscores a continuing easing of inflationary pressures. The core PPI, which excludes the volatile food and energy categories, was flat on a month-over-month basis, marking its most moderate level in four months, while rising 2.4% year-over-year. This wholesale inflation data precedes the more closely-watched Consumer Price Index (CPI) report, which is set to be released on Wednesday and is expected to show a modest increase.
In the context of diminishing inflationary pressures, the weak July employment data has led economists to forecast a series of rate cuts by the Federal Reserve, starting as early as next month.