The U.S. Producer Price Index (PPI) remained unchanged in September, with the decline in gasoline prices curbing the rise in prices, indicating that inflation is further easing, supporting the view that the Federal Reserve will cut interest rates again next month.

A report released by the U.S. Bureau of Labor Statistics on Friday showed that the PPI growth rate in September was the same as in August, after the index rose by 0.2% month-on-month in August. The PPI in September increased by 1.8% year-on-year, the smallest increase since February this year.

Many economists prefer to use a less volatile indicator that excludes the impact of food, energy, and trade, which rose by 0.1%, the smallest increase since May 2023.

The PPI data was released shortly after the more closely watched Consumer Price Index (CPI) data, which showed that CPI inflation in September was slightly higher than expected, driven by rising housing, food, and clothing prices.

Federal Reserve officials will consider these two reports as they plan their path to lower interest rates. Economists often analyze categories in the PPI data related to the Federal Reserve's preferred inflation indicator (Personal Consumption Expenditures Price Index), but these categories have mixed performances.

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The September PPI report showed that there was almost no change in the cost of doctor care and outpatient hospital fees, while airfare prices rebounded sharply. Portfolio management fees increased slightly. Service costs rose by 0.2%, slowing down from the 0.4% increase in the previous month. Food wholesale prices rose by 1%, the largest increase since February, while energy prices fell by 2.7%.

The September Personal Consumption Expenditures Price Index will be released later this month.

After the PPI data was released, U.S. Treasury yields continued to rise, with traders expecting the Federal Reserve to cut interest rates by 25 basis points next month.

The Federal Reserve initiated rate cuts last month, lowering rates by 50 basis points, after several months of cooling inflation and slowing wage growth. Since then, reports have shown a significant increase in job positions and ongoing price pressures, prompting economists to lower their expectations for a November rate cut to 25 basis points.

The PPI report showed that service costs rose by 0.2%, lower than the 0.4% increase in the previous month. Prices excluding food and energy rose by 0.2% for the third consecutive month. Food wholesale prices rose by 1%, the largest increase since February this year, while energy prices fell by 2.7%. The cost of processed goods in intermediate demand fell by 0.8%, due to a significant decrease in diesel fuel prices.Futures contracts betting on the Federal Reserve's policy interest rates continue to suggest that there is only a 15% chance the Fed will keep the target range for short-term borrowing rates at the current 4.75%-5.00% at its early November meeting. Most are betting that the Fed will cut rates at the last two meetings of this year and the first few meetings of next year, with the range expected to drop to 3.50%-3.75% by mid-next year.