On Thursday (June 12), with the release of the latest economic data from the United States, interest rate futures linked to the Federal Reserve's policy rates showed that market bets on consecutive rate cuts by the Fed starting in September were heating up.
The U.S. Labor Department reported that the number of first-time jobless claims remained relatively high as of last week, indicating that the labor market is gradually cooling, further reinforcing investor expectations for easing policies.
Meanwhile, another government report showed that the U.S. Producer Price Index (PPI) rose by 2.6% year-on-year in May, in line with economists' expectations, indicating that inflationary pressures have not intensified further.
U.S. PPI increase in May was less than expected
Affected by the decline in service costs such as airline ticket prices, the U.S. Producer Price Index (PPI) increase in May was below market expectations, further alleviating inflation concerns and providing space for the Federal Reserve to restart rate cuts within the year.
According to data released by the U.S. Bureau of Labor Statistics on Thursday, the PPI rose 0.1% month-on-month in May, reversing a revised decline of 0.2% in April. Prior to this, the market had generally expected a month-on-month increase of 0.2% for May, while preliminary data for April showed a drop of 0.5%.
In the 12 months ending in May, the PPI rose by 2.6% year-on-year, slightly higher than April's 2.5%, indicating that inflationary pressures remain overall mild.
Consumer-side prices have risen moderately, and the market is paying attention to the tariff effects in the second half of the year.
The data released the day before showed that the U.S. Consumer Price Index (CPI) in May rose only slightly month-on-month, mainly benefiting from the decline in gasoline and airline ticket prices. This trend echoes the decline in service costs in the PPI report, reflecting a cooling of overall demand.
However, economists warn that as the price transmission effects of the new round of tariff policies from the Trump administration gradually emerge, inflation may re-heat in the second half of the year.
The Federal Reserve may initiate 'two consecutive cuts' in September
Against the backdrop of generally mild inflation data, the market widely expects the Federal Reserve to maintain the federal funds rate in the range of 4.25%-4.50% at the FOMC meeting next Wednesday.
But from the implied pricing in the interest rate futures market, the probability of the Federal Reserve resuming rate cuts in September is steadily rising. Investors bet that once inflation stabilizes, the Fed may restart the easing cycle to address potential economic weakness.
Before the release of these two pieces of data, the interest rate futures market originally predicted that the Federal Reserve would cut rates for the first time in September and again in December. However, after the data was released, traders began to bet on the possibility of 'back-to-back' consecutive rate cuts in September and November, reflecting the accumulating concerns about an economic slowdown.