Producers' Inflation in the U.S. remains strong — surprises continue

October data brought unpleasant news for the Fed:

What happened:

• The Producer Price Index (PPI) jumped by 2.4% year-on-year instead of the expected 2.3% (was 1.9% a month ago)
• The core PPI soared to 3.1% instead of the forecast of 3.0% from 2.9% in the previous month.

Why this matter is serious: Production inflation is what is then passed on to the store shelves. If pressure at the production level increases, then the fight against consumer inflation becomes much more difficult. It creates a vicious circle.

But not everything is bad: The number of initial jobless claims fell to 217 thousand. ( against the expected 224 thousand.) — the labor market is holding firm. No signs of recession.

What next: It is unlikely that the Fed will raise rates — most likely it will be a pause. Why? Because the new president needs cheap money to implement ambitious plans, and the Fed ultimately cannot ignore the political context.

This is not bad for risky assets. High inflation usually means a weakening dollar, which supports cryptocurrencies and risky assets. The key is to avoid a crisis.

The market reaction itself was calm: BTC decreased locally, but there is no serious pressure.