Breaking: Crypto Market Tumbles After U.S. PPI Records Highest Gain In Months
According to a report released by the Labor Department on Thursday, wholesale inflation experienced a resurgence in the month of January, as producer prices grew more than what was anticipated at the beginning of the year. The increase in the Producer Price Index (PPI), which is a measurement of how much raw products fetch on the open market, was 0.7% for the month, making it the largest gain since June.
U.S. PPI Declines To 6%
After a decrease of 0.2% in December, economists polled by Dow Jones were expecting the index to rise by 0.4% in January. The core PPI climbed by 0.5% when food and energy were stripped out, which was far more than the 0.3% gain that was anticipated. The core excluding trade services climbed by 0.6%, which was significantly higher than the projection of 0.2%.
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Analysts believe that the primary cause of the inflation rate spike in January was a combination of payback from prior months that showed more moderated price increases and a few seasonal factors. A winter that was abnormally mild may also have had a role in this, as the already unpredictable price of fuel continued to rise throughout the month.
Market Reaction
Within minutes after the announcement, the stock market fell which also had a ripple effect on the crypto market. The Dow Jones Industrial Average dropped by 284 points, equivalent to 0.83%. Both the S&P 500 and the Nasdaq-composite experienced a decline of 1.40% and 1.12% respectively.
The broader crypto market also experienced a marginal decrease in total market capitalization, which currently sits at $1.09 trillion. The price of Bitcoin (BTC) fell by 0.6% in the past one hour and is currently trading at $24,400. Ethereum’s (ETH) price, on the other hand, also witnessed a drop of 0.30% while major altcoins such as Dogecoin (DOGE), Cardano (ADA) and Solana (SOL) shed a few points as well.
The PPI is closely watched by market participants as a measure of wholesale inflation. Due to the fact that producers typically pass on higher prices to their customers, it is regarded as a leading sign. The PPI announcement is also crucial for the Federal Reserve, which is still considering the number of rate increases it will need to make before coming to a halt.
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