Producer inflation in the USA surprises, Fed under pressure

Data regarding the American Producer Price Index (PPI) for April was significantly above expectations. The MoM PPI increased by 1.4%, while forecasts anticipated an increase of only 0.5%. At the same time, the core PPI, excluding food and energy, rose by 1% compared to the expected level of 0.3%. The annual PPI also surprised, reaching 5.2% against a forecast of 4.3%. Such results suggest that inflationary pressure in the USA is not easing, which may increase pressure on the Fed to continue the current interest rate policy, even though expectations for the June FOMC meeting do not foresee any changes in rates.

The House Financial Services Committee is working on a bill that could significantly impact the functioning of the Federal Reserve. The proposed changes aim to eliminate the Fed's dual mandate, which currently includes both maintaining price stability and maximizing employment. Such an approach could concentrate the Fed's actions solely on price stability, which would have far-reaching consequences for monetary policy, potentially limiting flexibility in responding to economic changes.

On the international stage, invitations for Gulf states such as Bahrain, Kuwait, Qatar, and the UAE to the upcoming NATO summit, where the situation in Iran will be discussed, have attracted attention. Such events may impact the political stability of the region and oil prices. In the context of commodities, U.S. crude oil inventories fell by 4.305 million barrels, which is a larger decline than the forecasted 2.454 million. The decrease in oil inventories may lead to an increase in commodity prices, which in turn could raise inflationary pressure.

Preliminary data on Eurozone GDP growth for the first quarter of 2026 indicates a stable growth rate of 0.8% year-on-year, in line with analysts' expectations. The stabilization of economic growth in the Eurozone is a positive signal, especially in the face of rising inflationary and geopolitical challenges that may influence the European Central Bank's decisions regarding monetary policy.

Tomorrow's events will focus on analyzing the markets' reaction to today's inflation data from the USA. Investors will also be monitoring further information regarding changes to the Federal Reserve Act and geopolitical tensions related to the situation in Iran. It is worth noting the upcoming macroeconomic publications that may influence expectations regarding Fed policy.