Here's what new data from the producer price index says about where inflation is headed, according to economists.

The cost of wholesale goods and services — where rising inflation tends to show up first — in July posted the biggest increase in three years, possibly heralding a sizable acceleration in price increases tied to higher U.

The producer price index (PPI) for final demand rose 0.9% month-over-month after a flat reading in June. Core PPI, which excludes food and energy prices, rose 0.9% month-over-month after a flat reading in June. In July, the PPI for finished goods rose 0.5% month-over-month, up from 0.4% in June.

Earlier this week, falling bond yields and growing expectations for aggressive Federal Reserve interest-rate cuts in the months ahead helped spark a rotation away from what had been working in the U.S.

US stocks fell on Thursday as wholesale inflation accelerated by the most in three years, halting a risk-on rally that helped set fresh record highs.

U.S. stock index futures slipped on Thursday after hotter-than-expected producer prices data contrasted with recent tame consumer prices data that had boosted bets of Federal Reserve interest rate cuts this year.

The report issued Thursday, known as the producer-price index, is volatile, and many analysts look to it more as a gut check on the inner gears of commerce than as one of the economy’s primary vital signs.

Thursday's hotter-than-expected PPI report hasn't moved the needle much when it comes to traders' expectations for a September Fed rate cut. Fed funds futures were pricing in more than 96% probability of a Fed rate cut in September,