#Gate广场五月交易分享 #美国4月PPI同比暴涨6% Is it time to consider interest rate hikes? U.S. inflation indicators continue to skyrocket, with April PPI hitting a four-year high

#Gate广场五月交易分享 #美国4月PPI同比暴涨6% Is it time to consider interest rate hikes? U.S. inflation indicators continue to skyrocket, with April PPI hitting a four-year high

The ongoing energy shock in the Strait of Hormuz continues to transmit through the inflation chain, causing producer prices in the U.S. to rise to their highest since 2022 last month, reigniting market concerns over Federal Reserve rate policy prospects. The consumer price data released a day earlier showed inflation reaching a three-year high. The latest surge in wholesale prices indicates that inflation will continue to rise in the coming months. Energy shock spreading
On Wednesday, the U.S. government announced that the Producer Price Index (PPI) for April surged by 1.4% month-over-month, marking the largest single-month increase in over four years. This is the sixth consecutive month of significant PPI increases, far exceeding Wall Street’s expectation of 0.5%.
Over the past year, U.S. wholesale prices have risen 6.0% year-over-year, doubling the pace since the beginning of the year and reaching the highest level since late 2022. Core PPI, excluding food and energy, was revised upward from 4% in March to 5.2%, surpassing the 4.3% forecast and hitting the highest year-over-year increase since December 2022.
As expected, rising oil prices are the main driver of inflation, but not the only factor. Upstream raw material inflation is even more astonishing: unprocessed energy raw materials jumped 9.2% in April, with a year-over-year increase of 48.9%. Prices for machinery, commercial equipment, transportation, chemicals, and other goods and services also rose in tandem, highlighting that energy costs have generated a broad spillover effect. The final demand trade service profit margin, reflecting wholesale and retail markup profits, jumped 2.7% in April, with transportation and warehousing services soaring 5.0% in a single month—reaching multi-year highs; freight truck rates increased, with energy costs significantly passing through to logistics. “Nearly 60% of the price increase in final demand in April came from a 1.2% rise in final demand service prices,” the U.S. Department of Labor said. Wholesale prices are a leading indicator of inflation, often foreshadowing subsequent consumer price changes. Data released on Tuesday showed the U.S. Consumer Price Index (CPI) rose to 3.8% in April, a new high for 2023. Montreal Bank Capital Markets wrote in a report sent to First Financial that: “The April PPI report indicates ongoing inflationary pressures. The May CPI may rise again, as U.S.-Iran conflict pushes energy prices higher and spreads to other sectors, further expanding inflationary pressures.” Scott Helfstein, head of investment strategy at Global X ETF, said: “Producer costs soaring largely tie to energy prices and have fully transmitted to goods and services data. This round of inflation shock is likely temporary, and shipping through the Strait of Hormuz will eventually normalize.
The real question is, how much pressure can the real economy—including consumers and businesses—still withstand?”

Policy outlook
After the PPI data was released, the yield on the 2-year U.S. Treasury note, most sensitive to Fed policy expectations, rose from 3.98% to 4.02%. The Fed rate futures market indicates that the market is betting on nearly a 40% chance of a rate hike before December this year. Boston Fed President Susan Collins said on Wednesday that she envisions rates remaining stable for an extended period but also acknowledged scenarios where some degree of policy tightening might be necessary to bring inflation back to the Fed’s 2% target. “This shock has slightly increased the downside risks to real economic activity, while inflation risks have tilted further upward.”
Meanwhile, the pass-through effect of tariffs on prices is gradually diminishing but has not yet been fully absorbed into goods prices. For incoming Fed Chair Jerome Powell, the current timing is extremely unfavorable. With only a month left before he presides over his first FOMC meeting as Fed Chair, overall inflation is accelerating again against the trend. Cleveland Fed’s early May preliminary forecast suggests that the overall CPI could further climb to 3.89% year-over-year. First Financial’s review shows that Wall Street generally believes that consumer price pressures will be difficult to ease in the short term. In the coming months, a secondary energy shock is expected to further push inflation above 4%. The future price trend will depend on when the U.S.-Iran conflict ends, whether the Strait of Hormuz can resume navigation, and how quickly oil prices fall.
“There is no clear end to the conflict yet, and the main drivers of inflation—energy, oil, gasoline, transportation, and food—will further rise in the coming months as global supply tightens and supply chain pressures increase,” said Joseph Brusuelas, chief economist at RSM. U.S. bank economist Stephen Juno defined April as an inflation turning point in a client report. Annex Wealth Management’s chief economist Brian Jacobsen warned, “Inflation is rising much faster than expected. Currently, energy shocks are mainly impacting corporate profit margins and have not yet fully transmitted to consumer prices; but if high oil prices persist longer, inflationary pressures will further spread to the consumer side.”