Mixed Signals For Interest Rates From Consumer And Producer Price Data

Market Commentary – August 18, 2025

With markets near historic highs, investors are weighing the odds that the Federal Reserve (Fed) will lower rates at the next meeting of its Federal Open Market Committee (FOMC) on September 19.

President Trump has made it clear he wants rate cuts – most presidents prefer rate cuts. The Fed, particularly Fed Chair Jerome Powell, has made it clear that it prefers to wait. Mixed signals from the Consumer Price Index (CPI) and the Producer Price Index (PPI) last week left the Treasury bond market disappointed and investors wondering what the FOMC might do about rates.

CPI Better Than Expected

The market expected CPI to rise 2.8% year-over-year, but it came in slightly lower at 2.7% year-over-year. This was widely perceived to make way for the FOMC to lower short-term interest rates by as much as 50 basis points, or 0.50%, at its September 19 meeting. Stocks rallied and Treasury bonds rallied along with them, pushing down interest rates.