US July PPI Rises 0.9%, Largest Increase in Three Years; Trump Tariffs Push Costs Higher, Market Reassesses Fed Rate Cut in September, Cryptocurrency Market Declines
(Background Summary: Bitcoin Surges to $124,500, Setting New Historical Highs! Ethereum Approaches $4,800)
(Context: Bitcoin Breaks $121,400, “Liquidation of $370 Million”; Tom Lee: Will Reach $250,000 by Year-End)
The U.S. Department of Labor announced last night (14th) that the Producer Price Index (PPI) for July increased by 0.9% month-on-month and 3.3% year-on-year. This data not only surpassed market expectations significantly but also set a record for the largest monthly increase in three years. The report immediately disrupted Wall Street’s expectations for cooling inflation and caused the already fragile prospects for rate cuts to retreat rapidly, leading to declines in both the U.S. stock and cryptocurrency markets.
Rising Production Costs and Pressure Transmitted to Consumers
PPI is often viewed as a leading indicator for the Consumer Price Index (CPI), as the costs borne by producers ultimately reflect in retail prices. The July data indicated a 1.1% increase in service costs, with trade profits rising by 2.0%, portfolio management fees skyrocketing by 5.8%, and airline ticket and hotel room rates rebounding by 3.1%. Meanwhile, goods costs also rose by 0.7%, with food, metals, and electronic components all experiencing price hikes, indicating that this wave of inflation is not isolated but rather structurally spread.
Tariffs Compound Labor Shortages
The market quickly turned its attention to the tariff measures implemented by the Trump administration. The import tariffs on steel and aluminum directly increased raw material costs, while intensified crackdowns on undocumented immigrants led to labor shortages in agriculture, resulting in a staggering 38.9% increase in the cost of fresh and dried vegetables. High Frequency Economics Chief Economist Weinberg remarked:
“For those who believe that tariffs would not impact domestic U.S. prices, this report is like a harsh blow.”
J.P. Morgan economist Hansen also warned that rising wholesale prices will take longer to fully reflect in consumer prices, indicating that there is still a risk of CPI increasing in the short term.
The Fed’s Dilemma: Rate Cut Timeline Forced to Be Delayed?
The unexpected surge in PPI has sounded alarm bells for global investors: wholesale cost pressures are returning, adding variables to the Fed’s policy direction. Over the next few months, whether CPI will follow suit and if Trump’s tariff negotiations can be eased will be critical in determining capital flows. If prices remain high while economic growth slows, the market will more frequently mention “stagflation.”
On the other hand, the July PPI report has narrowed the Fed’s monetary policy options. Fedwatch data showed that the market originally anticipated a 2-rate cut probability in September, which dropped to zero after last night’s data release. However, currently, there remains a 92.1% chance of a 1-rate cut, leaving investors to closely monitor the upcoming economic data.
Bitcoin Dips to $117,156
As for the cryptocurrency sector, Bitcoin plummeted sharply following the data release, hitting a low of $117,156 at midnight, with a current report of $118,360 before press time. Ethereum also fell below $4,500 at the same time but has just managed to rebound back to $4,600, showing significant recovery momentum.
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