US producer prices for April came in much warmer than expected on Wednesday, complicating the Federal Reserve’s path forward to easing monetary policy later this year.
The producer price index for April rose 1.4% month-on-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-on-year, both well above forecasts.
The report reinforced that inflation is accelerating again after Tuesday’s consumer price index (CPI) rose 3.8% year-on-year, the hottest inflation gauge in nearly three years.
Bitcoin (BTC), which was trading above $81,000 overnight, quickly fell below the key $80,000 level in the minutes after the release before recovering slightly. The largest cryptocurrency recently changed hands just above $80,000, down about 0.8% over the past 24 hours.
Stock futures were relatively steady ahead of 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 Fed as policymakers navigate rising energy prices linked to the ongoing Iran conflict and lingering concerns over supply disruptions around the Strait of Hormuz. Higher oil prices risk contributing further to the inflation figures in the coming months.
The report could also reignite the debate over whether the central bank may need to consider further tightening rather than cuts, even as President Donald Trump continues to push the Fed to cut interest rates.
This backdrop is particularly delicate as Kevin Warsh prepares to take over the leadership of the central bank, with investors closely watching how the incoming chair will balance risks of slower growth against resurgent inflationary pressures.
