The December 2022 Maker Price Index sees signs of inflation declining as bitcoin continues to rise above the $16,000 to $17,000 mark it has held since the collapse of FTX.
Bitcoin held strongly over the past fortnight to trade at around $21,400, as the month-to-month US PPI suggests that the Fed’s tightening policy is driving down inflation.
PPI shows dramatic decline in wholesale prices
Wholesale prices fell 0.5% month over month in December 2022, beating expectations for 0.1%. Excluding food and energy, the so-called core PPI rose one-tenth in December 2022, down from a 0.4% increase in November 2022.
The PPI for final demand rose 6.2% year-on-year in December 2022, beating analysts’ estimate of 6.8%, while the core PPI for the year eased slightly to 4.6%. Retail sales were slightly lower than expected, falling 1.1% in December 2022 compared to analysts’ 1% estimate. Without adjusting for inflation, the decline indicates a softening of consumer demand during the US holiday season.
Following the PPI release, bitcoin is up 0.3% to $21,455, breaking out of the $16,000-$17,000 range earlier this week, while ETH is up 0.8% to $1,580.
Released monthly by the US Bureau of Labor Statistics, the producer price index measures how much domestic producers in hundreds of economic sectors get paid to produce finished goods. When producers pay more to make goods and services, they may pass some of that cost on to the consumer, thereby contributing to inflation. The lower PPI month-to-month means that manufacturers can pass on the cost savings to the end user.
JPMorgan CIO says recession still possible despite investor optimism
Investors are increasingly bullish as markets consider the end of tighter policies from central banks and the easing of contagion effects from several major crypto explosions in 2022.
Bitcoin soared 28% during the two-week period ending January 17, 2023, marking a rally unseen since the asset traded at around $1,000. According to Naeem Aslam of AvaTrade, bitcoin will need to cross the $30,000 level for investors to breathe easy again.
“We are certainly not out of the woods. For this to happen, the bitcoin price … needs to break above the $30,000 level,” he warned.
JPMorgan Asset Management CIO and head of fixed income, currencies and commodities Bob Mitchell expects rate hikes in February and March 2023 as a base case, with a rate hike expected later in the year.
Citing recent jobs data revealing weak wage growth and declining unemployment levels, Mitchell predicted a mid-year recession, followed by further rate hikes, as rising wages fuel excess inflation. .
“The equation is this: Inflation doesn’t come down until wages go up. Wages don’t come down until unemployment goes up,” he said.
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