US Producer Prices Rise Less Than Expected In April, Cementing Hopes Of Fed Hold In June

Zinger Key Points
  • PPI inflation increased 0.2% monthly and 2.3% annually in April, below expectations.
  • Investors solidly expect a Fed rate hold in June and started to increase bets on a July rate cut.

The Producer Price Index (PPI) for final demand rose 0.2% month-over-month in April, rebounding after the revised 0.4% drop in March but coming in below the expected 0.3% increase, the U.S. Bureau of Labor Statistics reported Thursday.

The release came after the April's consumer price index (CPI) fell slightly more than expected to 4.9%, versus the 5% expected, fueling hopes of a Fed pause in June. 

PPI Falls Short of Expectations In April: 5 Things You Need To Know 

  • Headline PPI inflation rose 0.2% from a month ago, and 80% of the rise in the index for final demand can be attributed to a 0.3% increase in prices for final demand services.
  • In annual terms, producer prices fell from 2.7% in March to 2.3%, slightly below expectations of 2.4%. This marks the lowest producer inflation rate since January 2021. 
  • Core PPI inflation, which excludes foods and energy, increased 0.2% on the month, up from a revised flat reading in March and above expectations of 0.2%. 
  • An 8.4% advance in prices for gasoline was a key factor in the April surge in the index for final demand goods.
  • Over one-third of the April advance in the index for final demand services can be traced to a 4.1% rise in prices for portfolio management.
  • Market Reactions: 

The dollar, as closely tracked by the Invesco DB USD Index Bullish Fund ETF UUP, fell slightly by 0.1% in the minutes immediately after the PPI data, but still holding gains in a positive session. S&P 500 futures were flat ahead of the opening bell on Wall Street. The S&P 500 index is tracked by the SPDR S&P 500 ETF Trust SPY

A Look At Rate Probabilities For June FOMC Meeting

Prior to the PPI release, the market was fully pricing in the Fed keeping rates steady in June, and assigned a 44% chance that rates could be cut as early as July, according to CME Group Fedwatch tool. 

After the release, the market-based predictions did not materially change. 

Read next: Jamie Dimon Reportedly Warns US Debt Default Could Cause Financial Panic

Photo via Shutterstock. 

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