Insights 
VT 
The US Producer Price Index (PPI) for April 2025 rose by 2.4% year-over-year, just below the forecast of 2.5%, and down from the previous 2.7%. The month-on-month PPI declined by 0.5%, against an anticipated increase of 0.2%. Excluding food and energy, the year-over-year PPI matched expectations at 3.1%, while the month-on-month figure dropped by 0.4%, contrary to a predicted rise of 0.3%.
Excluding food, energy, and trade, the year-over-year PPI rose by 2.9%, compared to the previous 3.4%. The month-on-month change stayed steady at -0.1%. Before the data release, the market predicted 74 basis points of Federal Reserve easing over the year, now adjusted to 76 basis points, suggesting improving inflation conditions with potential undershoots in the June/July period owing to base effects.
Decline In Final Demand For Services
A notable decline was seen in the final demand for services, which fell 0.7% month-on-month, the steepest in over ten years. Intermediate goods inputs decreased by 2.0%, while construction prices saw a 0.4% reduction month-on-month. Overall, the data indicates ongoing disinflation, potentially affecting Federal Reserve decisions on interest rate cuts.
The numbers just released point to more than a minor cooling—what we’ve got is a trend that’s been building for several months now. The PPI falling 0.5% on the month, when markets had expected a rise, isn’t a small surprise. It’s a signal, and not just a noisy one. Across the board, we’re observing a consistent pullback in producer prices. When these prices fall, especially in services, which dropped harder than they have in more than a decade, it typically dampens future consumer inflation. That’s what traders tend to anchor their medium-term plays around.
Looking at the core measures—those excluding the typically unstable categories like energy and food—we’re still seeing softness. The most stripped-down version of the index rose 2.9% on the year, a full half-point lower than before. And month-on-month, there was no movement—flat again after last month’s fall. If you’re trading rate-sensitive assets, that suggests our expectations around the Fed’s response need fine-tuning.
We’re positioning for potential overshoots in dovish bets, but not in a reckless way. The slight uptick in expected easing from 74 to 76 basis points might seem marginal, but markets often react to changes in trajectory, not just the size. That shift reflects subtle, but clear re-pricing of the monetary path. It comes down to confidence in the disinflation trend continuing over the next few months.
Impact On Future Inflation Prints
Final demand services dropping by 0.7% is not just a headline number—it alters the base of future inflation prints. That drop often filters through with a lag, which tends to affect CPI down the line. When you pair that with construction costs falling and inputs diving 2.0%, it tells us upstream pressure is easing across sectors. The chain reaction from producer down to consumer is where we expect to see effects around June or July.
In terms of trading parameters, what matters now is timing. If we begin to see back-to-back monthly declines—or even stagnation—in core components, the probability of faster policy easing naturally increases. We watch swap markets closely for pricing signals, but ultimately it hinges on whether this softening of input costs translates into retail sectors.
The pressure point now is the duration of this soft patch in the data. If we see a few more months of weak final demand or price stagnation in core categories, the assumption that mid-year inflation might undershoot is no longer theoretical. It becomes embedded into rate policy thinking, and when that confidence increases, the response in rate expectations can accelerate.
What we’re doing now, and what’s critical for risk management, is paying closer attention to revisions. March’s strength, if revised meaningfully lower, would amplify the current numbers. Likewise, any dampening on service inflation readings in upcoming CPI data would validate the signal from the PPI. The market will be positioning earlier than usual if that becomes evident.
This release provides clearer direction than most. When input costs, service pricing, and upstream inflation all line up in one broad downward move, it’s hard to ignore. We’ll remain tactically defensive on the upside for yields, and carefully add exposure where rate-sensitive instruments offer asymmetric gain potential. Timing is calibrated for a 3–8 week window, and right now the data narrative supports that stance.
