April witnessed a further acceleration in the United States Producer Price Index (PPI), with a 0.5% increase compared to the previous month. After a period of slowing down in March, with a modest 0.1% increase, the index has resumed its upward trend, indicating persistent inflationary pressures in the economy. Over the 12 months leading up to April, the PPI grew by 2.2%, marking the largest increase since the same period in the previous year when it grew by 2.3%.
The core PPI, which excludes volatile elements like food and energy, experienced a growth of 0.4% in April. This increase represents a faster pace compared to the 0.2% growth observed in March. This particular indicator holds great significance for monetary policymakers as it excludes items that are most susceptible to supply shocks, providing a more stable view of inflationary pressures.
After the data was published, the price of Bitcoin dropped to $61,100. At the time of publication, the BTC price was quoted at US$61,700, experiencing a 2% decline in the last 24 hours.
The persistence of higher-than-expected inflation has direct implications for financial markets, particularly for investments deemed to be at higher risk, such as shares and cryptocurrencies. With inflation on the rise, expectations are increasing that the Federal Reserve (Fed), the central bank of the United States, may delay interest rate cuts or even raise rates in order to control inflation. A sector analyst emphasizes that “more than ‘full’ inflation, it is the ‘core’ that provides signals about the next steps in interest policy.” This core is considered a more accurate indicator of the inflation rate as it reflects prices that are most sensitive to the state of the economy.
In this context, the behavior of interest rates is crucial for the cryptocurrency sector. Increasing interest rates tend to strengthen the dollar and can dampen the appetite for riskier assets, including cryptocurrencies, which are often seen as alternatives during periods of low interest rates. Therefore, the increase in PPI may indicate a more challenging environment for crypto investors in the short to medium term.
Disclaimer: The views and opinions expressed by the author or anyone mentioned in this article are for informational purposes only and do not constitute financial, investment, or any other form of advice. Investing or trading cryptocurrencies carries the risk of financial loss.
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