The latest US Core PPI MoM reading for August 2025, released on September 10, shows a -0.10% change, down from 0.90% in July and below the 0.30% consensus estimate, according to the Sigmanomics database. This marks the first negative monthly print since early 2025 and contrasts with the 12-month average of 0.40%. The Core PPI excludes volatile food and energy prices, making it a critical gauge of underlying inflationary trends at the wholesale level.

Drivers this month

• Shelter-related costs contributed -0.18 percentage points, reflecting easing rent inflation.
• Used vehicle prices declined by -0.05 percentage points, continuing a multi-month downward trend.
• Services excluding trade, transportation, and warehousing remained flat, indicating stable demand.

Policy pulse

The Core PPI reading sits below the Federal Reserve’s 2% inflation target trajectory, reinforcing the case for a cautious approach to further rate hikes. The moderation suggests that prior monetary tightening is gradually tempering price pressures upstream.

Market lens

Immediate reaction: The US dollar index (USD) strengthened by 0.30% within the first hour post-release, while 2-year Treasury yields fell by 5 basis points, reflecting reduced expectations for aggressive Fed tightening. Breakeven inflation rates for 5 years declined by 8 basis points, signaling easing inflation expectations.

Core PPI is a foundational macroeconomic indicator that tracks price changes from the perspective of producers. It often leads consumer inflation metrics and provides insight into cost pressures that may eventually pass through to consumers. The August reading’s decline contrasts with the steady increases seen in the first half of 2025, where monthly gains averaged 0.50%.

Monetary Policy & Financial Conditions

The Federal Reserve’s ongoing rate hikes since late 2024 have tightened financial conditions, with the effective federal funds rate rising from 3.50% to 5.00%. This has dampened demand and investment, contributing to the recent Core PPI slowdown. Credit spreads have widened modestly, and bank lending standards have tightened, further restraining inflationary pressures.

Fiscal Policy & Government Budget

Fiscal policy remains moderately expansionary, with a 2025 federal deficit projected at 5.10% of GDP. However, government spending growth has slowed compared to 2024, limiting upward inflationary impulses. Infrastructure and social spending continue but are balanced by revenue increases and debt management efforts.

External Shocks & Geopolitical Risks

Global supply chains have largely normalized, reducing cost shocks seen in prior years. However, ongoing geopolitical tensions in Eastern Europe and the South China Sea pose upside risks to commodity prices and supply disruptions, which could reverse the current disinflation trend.

Comparing the current print with historical data, the Core PPI has averaged 0.30% MoM during the post-pandemic recovery phase (2021–2023) and peaked at 1.20% in mid-2022. The recent negative reading aligns with a broader trend of cooling inflationary momentum observed since early 2025.

Market lens

Immediate reaction: Following the release, the S&P 500 index dipped 0.40%, reflecting investor caution amid mixed inflation signals. The US dollar index rose, while the 10-year Treasury yield declined by 7 basis points, indicating a flight to safety and recalibration of Fed rate hike expectations.

Looking ahead, the Core PPI trajectory will be critical for monetary policy and inflation expectations. The Sigmanomics database suggests three scenarios for the next six months:

• Bullish (30% probability): Inflation pressures continue to ease, with Core PPI averaging 0.00% to -0.10% MoM, enabling the Fed to pause or cut rates by early 2026.
• Base (50% probability): Core PPI stabilizes around 0.10% MoM, consistent with moderate inflation and a gradual Fed tightening pause.
• Bearish (20% probability): Supply shocks or fiscal expansion reignite inflation, pushing Core PPI above 0.40% MoM, forcing the Fed to resume hikes.

Structural & Long-Run Trends

Long-term inflation dynamics are influenced by demographic shifts, productivity growth, and globalization. The current Core PPI decline may reflect structural easing as supply chains diversify and technological adoption improves efficiency. However, wage growth and energy transition costs could sustain inflationary pressures in the medium term.

Financial Markets & Sentiment

Market sentiment remains cautious but constructive. Equity volatility has declined since mid-2025, and credit markets show resilience. Inflation-linked bonds have seen reduced demand, reflecting tempered inflation fears. The US dollar’s recent strength supports the view of a stable macro environment but may weigh on export growth.

The August 2025 Core PPI MoM print of -0.10% signals a notable easing of inflation pressures at the producer level. This development supports the narrative of a gradual disinflationary environment, influenced by tighter monetary policy, fiscal restraint, and improving supply conditions. While risks from geopolitical tensions and fiscal policy shifts remain, the baseline outlook favors stable inflation and a cautious Fed. Market participants should monitor upcoming inflation data and geopolitical developments closely.

Key Markets Likely to React to Core PPI MoM

The Core PPI MoM release is a vital inflation gauge that influences multiple asset classes. Markets sensitive to inflation trends, monetary policy shifts, and economic growth will react notably. Below are five tradable symbols historically correlated with Core PPI movements:

• SPX – The S&P 500 index often reacts to inflation data through shifts in equity valuations and risk appetite.
• USDJPY – This currency pair reflects risk sentiment and monetary policy divergence, sensitive to US inflation prints.
• BTCUSD – Bitcoin’s price often moves inversely to inflation expectations and real yields.
• TSLA – Tesla’s stock is sensitive to inflation-driven input costs and consumer demand shifts.
• EURUSD – The euro-dollar pair reflects relative inflation and monetary policy expectations between the US and Eurozone.

Insight: Core PPI vs. SPX Since 2020

Since 2020, the Core PPI MoM and the S&P 500 index (SPX) have shown an inverse relationship during inflation surges. Periods of rising Core PPI often coincide with equity market corrections due to tightening monetary policy fears. Conversely, easing Core PPI readings have supported equity rallies. This dynamic underscores the importance of inflation data in shaping risk asset valuations and investor sentiment.

FAQs

What does the US Core PPI MoM indicate?

The US Core PPI MoM measures monthly changes in producer prices excluding food and energy, indicating underlying inflation trends.

How does the Core PPI affect monetary policy?

Core PPI trends influence Federal Reserve decisions on interest rates by signaling inflationary pressures in the supply chain.

Why is the Core PPI important for investors?

Investors use Core PPI to gauge inflation risks, which impact asset valuations, bond yields, and currency movements.

Takeaway: The unexpected Core PPI MoM decline in August 2025 suggests easing inflation pressures, supporting a cautious Fed and a stable macro outlook despite lingering risks.