U.S. producer prices for April were much higher than expected on Wednesday, complicating the Federal Reserve’s path to easing monetary policy later this year.
The producer price index rose 1.4% month-on-month in April, almost three times the 0.5% increase expected by economists. Annual producer inflation accelerated to 6%, and core PPI excluding food and energy rose 1% monthly and 5.2% year-on-year, both well above expectations.
The report highlighted that the consumer price index (CPI) rose 3.8% year-on-year on Tuesday, the hottest inflation data in the past three years, and that inflation is accelerating again.
Bitcoin (BTC) traded above $81,000 overnight, quickly falling below the key $80,000 level within minutes of publication before recovering slightly. The largest cryptocurrency recently changed hands at just over $80,000, down about 0.8% in the past 24 hours.
Stock futures remained relatively steady ahead of the U.S. open, with Nasdaq 100 futures up 0.2% and S&P 500 futures little changed.
The inflation surprise adds another layer of uncertainty to the Fed as policymakers grapple with rising energy prices linked to the ongoing conflict with Iran and ongoing concerns about supply disruptions around the Strait of Hormuz. Rising oil prices may further impact inflation data in the coming months.
The report could also reignite discussions about whether the central bank needs to consider further tightening rather than cuts, even as President Donald Trump continues to pressure the Fed to lower interest rates.
The backdrop is particularly delicate as Kevin Warsh prepares to take over leadership of the central bank, with investors closely watching how the incoming chairman balances risks of slowing growth with resurgent inflationary pressures.
