The Producer Price Index (PPI) held steady month-over-month, coming in cooler than expected, though the inflation indicator saw more significant year-over-year increases than estimated. Wolfe Research chief economist Stephanie Roth joins Seana Smith and Brad Smith on Morning Brief to discuss the latest economic data and what signals about the Federal Reserve’s next move in the ongoing rate easing cycle.

“Today's data was okay. At the margin, it actually was a little bit more hawkish than at least the headline print would suggest,” Roth says, explaining she’s focusing on what the PPI data indicates about the Personal Consumption Expenditures price index (PCE), which tends to hold more weight for the Fed.

“What really matters for the PPI is the components that go into the all-important core PCE index, which is what the Fed targets. So today's data actually was a little bit stronger for some of the key components that go into that PCE index. So things like household insurance, nursing, hospitals. So for those, it actually takes up our core PCE estimate. Right before the [PPI] print, we were looking for about 0.25% on core PCE. Now it's looking like it could be a little bit hotter, which is higher than what the Fed is looking for.”

She says, “If you take a step back, we do think that the Fed is able to cut the next meeting, but it's a toss-up and perhaps a bit higher than what the market is anticipating at the moment.”

“Rates are still high relative to neutral, so [the Fed] certainly should be cutting,” Roth says, noting, “Could they have skipped a meeting in November? Of course. But it probably looks a little bit strange to go 50 basis points and then skip a meeting, but they certainly could.”

She adds, “I do think that we'll have some skips in store. Perhaps not this year, but perhaps at the beginning of next year.”

To watch more expert insights and analysis on the latest market action, check out more Morning Brief here.

This post was written by Naomi Buchanan.