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 was anticipated to start 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 284 points, which is 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 $1.10 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.

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 how many rate increases it will need to make before pausing.

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