U.S. producer prices were unchanged in September, pointing to a still-favorable inflation outlook and supporting views that the Federal Reserve would cut interest rates again next month.

The unchanged reading in the producer price index for final demand last month followed an unrevised 0.2% gain in August, the Labor Department's Bureau of Labor Statistics said on Friday. Economists polled by Reuters had forecast the PPI edging up 0.1%.

In the 12 months through September, the PPI increased 1.8% after climbing 1.9% in August. Government data on Thursday showed consumer prices rising slightly more than expected in September, lifted by higher food costs.

INFLATION RISES 2.4% IN SEPTEMBER, ABOVE EXPECTATIONS

Most economists did not view the uptick in inflation as a sign that price pressures were building up again. Housing inflation cooled considerably in September. Economists expected mild increases in September in the inflation measures tracked by the U.S. central bank for its 2% target.

US ECONOMY ADDED 254K JOBS IN SEPTEMBER, WELL ABOVE EXPECTATIONS

Traders anticipated a 25 basis points rate reduction at the Fed's Nov. 6-7 policy meeting.

They have abandoned expectations for a half-point rate reduction following a strong September employment report as well as other data that have offered a more upbeat picture of the economy than previously thought.

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The Fed last month cut its policy rate by 50 basis points to the 4.75%-5.00% range. It hiked rates by 525 basis points in 2022 and 2023.