Producer inflation cools as September rate hike odds fall

U.S. producer prices were flat in July as lower goods prices offset a modest rise in services costs, reinforcing expectations that the Federal Reserve could keep rates unchanged at its September meeting. The Producer Price Index for final demand showed no change, following a revised 0.1% decline in June. Economists surveyed by Reuters had expected a 0.2% increase. Prices were up 4.7% year over year, down from 5.5% in June. Markets priced a roughly 67.6% chance the Fed would hold its 3.50%–3.75% overnight rate range on September 15-16, with a hike probability falling to 32.4%. Goods declined 0.7%, while services rose 0.2%. Separate data showed initial jobless claims increased by 9,000 to 209,000 for the week ended August 8.