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.
April’s producer price index rose 1.4% month over month, nearly triple economists’ expectations for a 0.5% increase. Annual producer inflation accelerated to 6%, while core PPI, excluding food and energy, rose 1% month-on-month and 5.2% year-over-year, both well above forecasts.
The report reinforced that inflation is reaccelerating after Tuesday’s consumer price index (CPI) rose 3.8% year-over-year, the highest inflation reading in almost three years.
Bitcoin (BTC), which traded above $81,000 overnight, quickly fell below the key $80,000 level in the minutes after publication before recovering slightly. The largest cryptocurrency recently changed hands just above $80,000, down about 0.8% in the last 24 hours.
Stock futures were relatively stable before the US open, with Nasdaq 100 futures up 0.2% and S&P 500 futures little changed.
The inflation surprise adds another layer of uncertainty for the Federal Reserve as policymakers navigate rising energy prices tied to the ongoing conflict with Iran and lingering concerns about supply disruptions around the Strait of Hormuz. Rising oil prices risk further influencing inflation data in the coming months.
The report could also reignite debate over whether the central bank might need to consider additional tightening rather than cuts, even as President Donald Trump continues to pressure the Federal Reserve to lower interest rates.
That backdrop is especially delicate as Kevin Warsh prepares to take over leadership of the central bank, as investors closely watch how the incoming president will balance the risks of slowing growth with resurgent inflationary pressures.
