The June PPI release printed at 8:30 ET Thursday July 16 with final demand headline at plus 0.1 percent month-over-month and core (final demand ex food and energy) at plus 0.2 percent, both landing inside consensus. Twelve-month readings sit at 2.4 percent headline and 2.7 percent core. The three cross-check lines against Tuesday’s June CPI all confirm. September 17 cut probability closed Thursday at 99 percent inside the SR3 strip, up one point from Wednesday. December 10 second cut probability moved from 62 percent Wednesday to 65 percent Thursday, three points on the print. The July 30 decision itself carries no cut in the curve.

The three lines that confirmed

PPI healthcare services printed at plus 0.14 percent month-over-month, in line with the pre-release read. That line feeds directly into the PCE medical services deflator, which the Fed dot median tracks against. The June PCE release lands Thursday July 31 at 8:30 ET, the day after the FOMC decision. A PPI medical services print at 0.14 with CPI medical services at 0.19 (Tuesday’s June CPI reading) implies the PCE medical services line prints in the 0.14 to 0.17 range, consistent with the June SEP two-cut path.

PPI final demand goods came in at minus 0.1 percent month-over-month, with the energy sub-index down 1.8 percent. That confirms the CPI core goods ex used vehicles line at minus 0.05 percent Tuesday. Core goods deflation is now four consecutive prints. The tariff pass-through the desk was watching for through the April-June window did not show up in the June PPI goods line, and the pipeline evidence for goods disinflation into the September FOMC is clean.

PPI final demand services ex trade and transportation printed at plus 0.22 percent, the supercore proxy. That is a soft read against consensus at 0.25 percent and against the trailing three-month run rate at 0.28 percent. Services disinflation is showing up in the pipeline before it shows up in the CPI print, which is the sequence the June SEP framework requires for the two-cut path.

What the curve did on the day

The SR3 strip repriced modestly on the PPI clear. Sep 17 cut moved from 98 to 99 percent, effectively fully priced now. Dec 10 second cut moved from 62 to 65 percent, the three-point drift the desk was flagging on a soft supercore proxy. January 28 third cut probability moved from 28 to 32 percent, four points, still outside the two-cut median but close enough to the arithmetic that a dovish July press conference could pull it above 40.

The two-year yield fell 4 basis points on the print to 3.68 percent, the lowest close since April 22. The five-year fell 3 basis points to 3.82 percent. The ten-year was flat at 4.14 percent. The two-ten spread widened 4 basis points to plus 46 basis points, the steepest since June 3. Curve steepening on a soft PPI is the tell that the desk is pricing more Fed cuts, not fewer, and pricing them earlier rather than later.

The DXY closed down 0.3 percent to 101.4. The EUR/USD cross closed above 1.09 for the first time since June 18. Gold printed a fresh cycle high at 2,478 into the close. All three moves are consistent with a Fed that is closer to cutting than the June SEP median implied.

What is left to price

Three pieces into the July 30 FOMC.

One, the statement’s risk paragraph. June language read “uncertainty about the economic outlook has diminished” and characterized risks as “roughly in balance.” The three plausible July revisions map to different pricing outcomes. A repeat of the June language leaves the December second cut inside the curve at the current 65 percent and does not open the third cut. A tilt to “the Committee judges the balance of risks has shifted toward employment” pulls the second cut probability above 75 percent and opens the third to the 40 to 45 percent band. A hawkish tilt back toward inflation-risk language pulls the second cut back to the 50 to 55 percent range and forecloses the third for six weeks until the September SEP.

Two, the Powell press conference. The desk is reading against two pairs of lines. Whether Powell frames the June CPI and June PPI clears together as “confirming” the disinflation path or as “one datapoint” each. And whether he frames September as “on track” or “meeting by meeting.” The confirming-plus-on-track pairing pulls the second cut into the 70 to 75 percent band and opens the third. The datapoint-plus-meeting-by-meeting pairing walks the second cut back to 55 percent.

Three, the June PCE print on Thursday July 31. That print lands the day after the FOMC and will show which reading of the presser the desk took. PCE headline consensus sits at 0.05 percent month-over-month, core PCE consensus at 0.15 percent. A core PCE at or below 0.15 with the July presser reading as confirming would price the second cut above 75 percent on the July 31 close. A core PCE above 0.20 would walk the second cut back below 60 percent regardless of the presser reading.

Bottom line

The September cut is sealed. The December second cut is inside the arithmetic at 65 percent and moving. The July 30 decision is a no-cut hold with the curve fully priced. The tape is not asking the Fed to cut in July. It is asking Powell whether to close the second cut or open the third, and the June PCE print on July 31 will settle which reading the desk took inside 24 hours of the presser closing.