PPI Data Sparks Crypto Rally, But Economists Fear Tariff Fallout
The U.S. Bureau of Labor Statistics releases the Producer Price Index (PPI), an important measure of inflation. Wholesale prices rose less than expected in December, according to a report on Tuesday, a positive sign for the economy amid concerns that inflation is not falling fast enough to warrant a rate cut to 2%.
The core PPI, which measures changes in prices for manufactured goods and services sold by producers except food and energy, was flat at 0%, compared with analysts’ estimates of 0.2%. Likewise, the monthly Producer Price Index (PPI) came in below expectations at about 0.2%, compared with the consensus estimate of 0.4%.
Impact on the U.S. Dollar Index
The U.S. dollar index (DXY) retreated from key psychological resistance around 110 on Tuesday to hover around 109 mid-quarter in New York following the release of PPI data.
The U.S. Dollar Index is expected to experience greater volatility in the coming weeks as the U.S. changes political direction under the Trump administration.
In addition, the Trump administration has also hinted that it will increase international tariffs to promote the development of local companies and enterprises.
“Today is a small victory for inflation, and the incoming president-elect’s policies will either continue to improve inflation or make it worse,” said Chris Ripkey, chief economist at FwdBonds.
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While a small victory in inflation does not guarantee a rate cut later this month, cryptocurrency markets have rebounded on a weaker U.S. dollar. The U.S. federal funds rate remains at 4.5% after several interest rate cuts since September last year.
For the cryptocurrency industry, the next few weeks will be a huge pivotal moment in the ongoing bull rally. This high-impact news will significantly impact the overall macro bullish momentum.
