Acceleration of PPI in the USA Impacts Interest Market and Reflects on the Cryptocurrency Sector

April brought a further acceleration in the United States Producer Price Index (PPI), registering a 0.5% increase compared to the previous month. After a phase of deceleration in March, with a modest increase of 0.1%, the index resumed its upward trajectory, which suggests persistent inflationary pressures in the economy. In the 12 months up to April, the PPI grew by 2.2%, marking the biggest increase since the same period of the previous year, when it had grown by 2.3%.

The core PPI, a measure that excludes the most volatile elements such as food and energy, showed growth of 0.4% in April. This increase represents an acceleration in relation to the 0.2% growth observed in March. This indicator is especially relevant for monetary policymakers, as it excludes items most susceptible to supply shocks, offering a more stable view of inflationary pressures.

After the release of the data, the price of Bitcoin fell to US$61,100. At the time of publication, the price of BTC was quoted at US$61,700 with a drop of 2% in the last 24 hours.

The persistence of higher-than-expected inflation has direct implications for financial markets, especially for investments considered to be at higher risk, such as shares and cryptocurrencies. With inflation accelerating, expectations are rising that the Federal Reserve (Fed), the American central bank, may postpone interest rate cuts or even raise rates to control inflation. “More than ‘full’ inflation, it is the ‘core’ that gives signals about the next steps in interest policy”, highlights a sector analyst. This core is considered a more accurate indicator of the inflation rate, as it reflects prices that are most sensitive to the economy’s temperature.

In this context, the behavior of interest rates is crucial for the cryptocurrency sector. Rising interest rates tend to strengthen the dollar and can reduce appetite for riskier assets, including cryptocurrencies, which are often seen as alternatives during periods of low interest rates. Thus, the increase in PPI may signal 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 other advice. Investing in or trading cryptocurrencies carries a risk of financial loss.