Wholesale Prices Unexpectedly Fall as Fed Chair Warsh Testifies

U.S. wholesale prices unexpectedly declined in June, easing rate-hike fears just as Fed Chair Kevin Warsh delivered his debut Senate testimony on inflation. Plus, ASML raises guidance on AI demand, and the Bank of Canada holds rates steady.

Transcript

Welcome to Finance TL;DR Daily, the podcast where we break down the biggest stories in finance. It's Wednesday, July fifteenth. Today, we're looking at an unexpected drop in wholesale inflation that is shaking up expectations for interest rates.

Here's what's moving today:

Producer prices in the United States unexpectedly fell in June, bringing some welcome relief to financial markets. The Producer Price Index, or PPI—which measures inflation at the wholesale level, before it reaches consumers—dropped by zero point three percent last month. That completely defied the Dow Jones consensus estimate, which predicted the wholesale gauge would remain completely unchanged. The decline was fueled by a sharp drop in energy costs, with final demand energy plunging six point four percent, driven by a twelve percent drop in gasoline prices. On an annual basis, headline wholesale prices rose five point five percent through June, representing a sharp cooling from the revised six percent rate recorded in May. Core PPI, which excludes volatile food and energy costs, edged up just zero point two percent, slightly cooler than the zero point three percent projection. This cooling trend across both producer and consumer prices gives the Federal Reserve more leeway to pause its rate-hiking cycle. The shifting outlook was echoed by New York Fed President John Williams, who indicated to CNBC that inflation has likely peaked, suggesting that the current federal funds rate is appropriately set.

This cooling inflation data landed just as Federal Reserve Chair Kevin Warsh delivered his debut semiannual monetary policy testimony before the Senate Banking Committee. Testifying with inflation hovering around three point three percent, Warsh pledged a resolute commitment to curb inflation back down to the central bank's two percent target. While he welcomed the fresh wholesale price report showing the zero point three percent decline in June, the Fed Chair quickly tamped down expectations of an imminent policy shift. He stated that any central bank would be happy to have the data going in the right direction, but noted that inflation measures remain imperfect. Warsh added that the Federal Open Market Committee's goal was to get monetary policy right, or as near to it as possible, to ensure the inflation surge becomes a thing of the past. His remarks follow the Fed's June decision to hold the benchmark interest rate steady at a range of three point five zero percent to three point seven five percent, while its internal projections signaled potential future rate hikes. By refusing to offer explicit forward guidance on what comes next, Warsh is forcing investors to closely parse raw economic data and public comments to determine whether the Fed will raise rates later this year.

Meanwhile, in the technology sector, the massive spending on artificial intelligence shows no signs of slowing down. Dutch semiconductor equipment giant ASML reported strong second-quarter results and raised its full-year revenue outlook for the second time this year, driven by robust demand for AI hardware. For the quarter ending June thirtieth, the company posted net sales of nine point three three billion euros and a net income of two point nine two billion euros, easily outperforming analyst expectations of eight point eight billion euros in sales and two point six two billion euros in net profit. ASML's gross margin for the quarter registered at fifty-four percent, coming in above the company's own expected range of fifty-one to fifty-two percent. Looking ahead, ASML raised its full-year sales guidance to a range between forty-three billion and forty-five billion euros, up significantly from its prior projection of thirty-six billion to forty billion euros. As a vital provider of lithography machines—the highly complex equipment used to print microchips—ASML's upgraded forecasts reassure investors that substantial global spending on deep-tech AI infrastructure remains robust and sustainable.

While the U.S. and global tech sectors react to these shifts, policymakers north of the border are carving out their own path. The Bank of Canada held its benchmark interest rate steady at two point two five percent today, marking the sixth consecutive meeting where rates have remained unchanged. Canadian policymakers adopted a wait-and-see stance amid ongoing economic headwinds, as Canadian gross domestic product was roughly unchanged from the first quarter of last year to the first quarter of this year. Compounding these growth challenges is a recent spike in headline inflation, which hit three point two percent in May due to volatile global energy markets fueled by the conflict in the Middle East. However, the central bank observed in its monetary policy report that after a year of weakness, Canada's economy is showing signs of improvement, pointing toward an expected second-quarter rebound. Governor Tiff Macklem also softened his previous hawkish rhetoric, removing warnings of successive rate hikes as energy price shocks begin to show signs of stabilizing. For financial markets, the decision illustrates how major central banks are maintaining restrictive policy baselines to anchor long-term inflation targets while navigating persistent geopolitical and trade-related uncertainties.

This has been Finance TL;DR Daily. We'll see you tomorrow.

In this episode

• U.S. wholesale prices unexpectedly fall 0.3% in June, easing rate-hike fears — source
• Federal Reserve Chair Kevin Warsh pledges to curb inflation in Senate testimony — source
• ASML beats Q2 expectations and raises full-year sales guidance on AI demand — source
• Bank of Canada holds benchmark interest rate steady at 2.25% — source

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