U.S. producer prices for April came in far hotter than expected on Wednesday, complicating the Federal Reserve's path forward to ease monetary policy later this year.
The April 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 climbed 1% on the 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 hottest inflation reading in almost three years.
Bitcoin (BTC), which traded above $81,000 overnight, quickly dropped below the key $80,000 level in the minutes following the release before recovering slightly. The largest cryptocurrency was recently changing hands just above $80,000, down about 0.8% over the past 24 hours.
Equity futures held 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 for the Fed as policymakers navigate rising energy prices tied to the ongoing Iran conflict and persistent concerns over supply disruptions around the Strait of Hormuz. Higher oil prices risk feeding further into inflation data in the months ahead.
The report could also revive discussion of whether the central bank may need to consider additional tightening rather than cuts, even as President Donald Trump continues to pressure the Fed to lower interest rates.
That backdrop is especially delicate as Kevin Warsh prepares to take over leadership of the central bank, with investors closely watching how the incoming chair will balance slowing growth risks against resurgent inflation pressures.
