Markets were largely unfazed by hotter wholesale inflation and rising consumer prices, raising concerns among some economists. The Producer Price Index surged to a three-year high in July, with services inflation playing a key role. The Federal Reserve, which targets 2% inflation, faces a precarious position with tensions between price stability and employment. Massive downward revisions in the July jobs report fueled rate cut concerns, despite markets pricing in an 85% probability of a rate cut in September. Federal Reserve Chair Jerome Powell’s upcoming speech may provide hints on the Fed’s next policy move. Some economists argue for rate hikes in response to broad-based inflationary pressures. Chicago Fed president cautioned against continued rise in services prices, which could be worrisome. The latest numbers paint a mixed picture, with inflation momentum suggesting deviation from the Fed’s mandate. Despite recent downward revisions, the labor market remains strong, supporting consumer spending. However, cracks are emerging as payroll growth slows and job openings decline, indicating a potential economic slowdown. Market strategist Chris Watling believes the Fed should start easing in September and continue cutting rates through the end of the year, citing a slowdown in underlying growth that outweighs any short-term inflation uptick. The Fed’s cautious approach has drawn criticism from some experts like Watling.

Read more at Yahoo Finance: July inflation data has economists on edge