Producer Price Growth Remains Muted

Weak inflation data, Powell news spur a volatile session. June PPI data was lower than expected across all readings, which fueled a decline in Treasury yields amid bets for earlier rate cuts. The move then accelerated after reports said a White House official expected President Trump to remove Powell as Fed Chair. However, price action reversed course after Trump denied the claims. Ultimately, yields closed 1-5 bps lower across a steepening curve, with the 2-year now at 3.89% and the 10-year at 4.46%.

President Trump shoots down reports that he is likely to oust Powell as Fed Chair. Speculation that Chair Powell is soon to be fired was short-lived today after President Trump said “No, we’re not planning on doing anything… I don’t rule out anything, but I think it’s highly unlikely, unless he has to leave for fraud.” Powell’s term as Fed Chair ends in May 2026, and it remains unclear if he will continue as a Fed Governor thereafter, where his term ends in January 2028. While many have assumed that a new Fed Chair will lead to more aggressive rate cuts, the path forward would remain uncertain. Fed President Barkin alluded to that point yesterday by responding “It happens… we’ll just have to see” when asked about the rare occasions where the FOMC did not follow the Fed Chair’s recommendations.

Producer inflation lands below expectations across all measurements. Today’s PPI release showed producer prices remained unchanged in June, and followed yesterday’s muted CPI results. Monthly PPI was 0.0% across all measurements vs. expectations of a 0.2% advance and lower than May’s 0.1% results. On a yearly basis, headline PPI fell from May’s 2.7% print to 2.3%, below expectations of a 2.5% result, while core PPI fell from 2.8% to 2.5%. The decline in producer inflation was largely related to lower travel costs, which offset an increase in goods prices, and extended a series of below-expectation results in recent months. Closely watched components of PPI that feed directly into PCE, such as portfolio management, airfare and healthcare costs, offered mixed results. Overall, the release was viewed positively by markets as a sign that manufacturers are still holding back on passing along tariff-related price increases.