Earlier today, October 11, the U.S. released its Producer Price Index (PPI) inflation data for the month of September shooting by 2.2% against the expected 1.6%. On a year-over-year basis, this has been the largest move since April 2023.
PPI Inflation for September On Steep Rise
The development could most likely put further pressure on risk-on assets like equities and crypto. The monthly PPI rate came in at 0.5%, surpassing the anticipated 0.30%, with the previous value being 0.70%. In September, U.S. PPI experienced a higher-than-expected increase, largely attributed to the escalation in energy prices. PPI is recognized as a leading indicator of inflation.
The driving force behind inflation pressures was primarily the surge in final demand for goods, which increased by 0.9% during the month, while services showed a 0.3% rise.
Market observers consider the PPI as a leading indicator of inflation because it assesses a broad spectrum of costs associated with goods in the production pipeline that eventually impact consumer products.
On Thursday, October 12, the Labor Department will release its more closely monitored consumer price index data. Expectations are a slight deceleration in the rate of inflation. If so, this would prevent any further selling pressure in equities and crypto.
Bitcoin and Inflation
So far, Bitcoin has shown good resilience to the developing macro conditions and inflationary pressure. In comparison to the broader crypto market, the BTC price has shown subdued volatility and is currently holding just above the $27,000 level.
As reported earlier, Bitcoin whales have shown confidence in these testing times and accumulated over 20,000 Bitcoins since the beginning of the month. Furthermore, Bitcoins institutional funds witnessed healthy inflows last week.
However, as we approach the Bitcoin halving, scheduled in mid-2024, the next 6 months could be crucial for investors from a volatility point of view. Billionaire Paul Tudor Jones also warned about the rising geopolitical tensions in the market. However, he is betting on Bitcoin and Gold as an inflation hedge.
Note that the IMF has already warned about stick inflation and weaker growth in 2024. This could further dampen the post-halving Bitcoin price rally.
Over the past few days, officials from central banks have suggested that they might not have to implement further interest rate increases, given the significant rise in Treasury yields, which has independently tightened financial conditions. This development, in turn, has helped alleviate market anxieties, propelling stocks higher during this week.
