Wholesale Inflation Surprises with Higher-than-Expected PPI
Inflation at the wholesale level has taken investors and policymakers by surprise as the latest data reveals a greater-than-anticipated increase in prices. The Producer Price Index (PPI) for January reported a rise of 0.4%, surpassing economist predictions of 0.3% and the 0.2% increase noted in December. On a year-over-year basis, the PPI soared by 3.5%, outpacing estimates that projected a 3.2% rise, while December’s figure stood at 3.3%.
Moreover, the Core PPI, which excludes volatile food and energy prices, also exceeded expectations with a 0.3% increase compared to forecasts of 0.3% and a 0% change in December. Year-over-year, the Core PPI rose by 3.6%, again exceeding estimates that anticipated a 3.3% increase, while December’s data showed a 3.7% rise.
As anticipation builds around new tariff announcements from former President Trump scheduled for later today, the price of bitcoin (BTC) remains under pressure, trading around the $96,000 mark.
Typically not a focal point for market watchers, the PPI figures have gained significance following yesterday’s unexpected Consumer Price Index (CPI) data, which revealed significantly stronger inflation than predicted for January. During his testimony before Congress, Federal Reserve Chairman Jerome Powell acknowledged the persistent inflationary challenges, stating that there is still much work to be done in this area. The PPI results have become even more critical, as Powell indicated he would be looking for today’s figures to confirm the disappointing CPI data.
After implementing a substantial cut of 100 basis points in the final months of 2024, Powell and the Federal Reserve have made it clear that they intend to pause any further monetary easing until there is a noticeable slowdown in either the economy or inflation rates. Prior to the release of the PPI data, market predictions, as indicated by the CME Fed Watch Tool, suggested that investors were only anticipating a single rate cut throughout all of 2025.
