The Producer Price Index (PPI), which measures inflation on the wholesale level, increased by 0.1% in June, coming in just below expectations. On an annual basis, PPI fell from a downwardly revised 0.9% to only 0.1%, which is the lowest level in almost three years. Core PPI, which also strips out volatile food and energy prices, rose by 0.1%, with the year-over-year reading dropping from 2.6% (also downwardly revised) to 2.4%.

What’s the bottom line? This latest PPI report is another encouraging sign that inflation is easing, with June’s 0.1% year-over-year reading a sharp drop from last year’s 11.7% peak. Plus, PPI tends to lead the way for CPI, which suggests further good progress moving forward.

The Fed must be pleased with both the CPI and PPI readings for June, as they started hiking their benchmark Fed Funds Rate (which is the overnight borrowing rate for banks) last year to slow the economy and help curb runaway inflation. While the Fed is still expected to hike at their meeting later this month, the real question is what will they do at the following meeting in September?