The newest U.S. inflation report surprised investors and put pressure on Bitcoin prices. The Producer Price Index, also called PPI, measures how much prices are rising for goods sold by producers.
In December, this number was higher than experts expected. This shows that inflation is still strong and not slowing down as much as hoped.
Because inflation remains high, the Federal Reserve may decide to keep interest rates elevated for a longer time instead of cutting them soon. Higher interest rates usually make risky assets like Bitcoin less attractive.
As a result, many investors sold Bitcoin after the report, causing its price to fall.
PPI Inflation Beats Expectations
According to data from the U.S. Bureau of Labor Statistics, producer prices rose 3 percent year over year in December, higher than the 2.7 percent forecast.
On a monthly basis, PPI increased 0.5 percent, also above expectations of 0.2 percent.
Core PPI, which excludes food and energy, climbed 3.3 percent year over year. While slightly lower than November’s 3.5 percent reading, it still exceeded the 2.9 percent estimate.
On a monthly basis, core PPI jumped 0.7 percent, far above the projected 0.2 percent increase.
The stronger-than-expected inflation signals that price pressures remain sticky, making it harder for the Fed to confidently begin cutting interest rates.
Bitcoin Reacts With a Pullback
Bitcoin’s price fell after the new U.S. inflation data was released. Investors became more careful because higher inflation could mean the Federal Reserve will keep interest rates high for longer. Higher rates are usually not good for risky assets like cryptocurrencies.
Bitcoin dropped more than 2 percent, sliding from an earlier high near 83,000 dollars to around 82,000 dollars. During the day, it even touched levels close to 81,000 dollars before trying to recover.
This move shows that Bitcoin is still strongly affected by economic news, especially reports that can change the Federal Reserve’s future interest rate decisions.
Fed Remains Cautious on Rate Cuts
The hot PPI data comes shortly after the Federal Reserve decided to keep interest rates unchanged. Fed Chair Jerome Powell previously warned that inflation is still running above the central bank’s 2 percent target and requires close monitoring.
Federal Open Market Committee (FOMC) members have already indicated they are not in a hurry to cut rates again after making three reductions last year. With the labor market stabilizing and inflation still elevated, policymakers are leaning toward a “wait and see” approach.
Last week’s Personal Consumption Expenditures (PCE) index, another key inflation gauge, showed prices rising 2.8 percent, further supporting the case for caution.
Chris Waller Supports More Rate Cuts
Even though inflation remains high, Federal Reserve Governor Chris Waller believes interest rate cuts could still be needed.
He explained that some of the recent rise in prices is due to tariffs and temporary factors. Because of this, he thinks the Fed should not overreact as long as long-term inflation expectations remain stable.
Waller also said the labor market is showing signs of weakness. The unemployment rate has increased since the middle of last year, and job growth has slowed down.
He pointed out that total job gains in 2025 were much lower than the average seen over the past decade. This suggests the economy may not be as strong as it looks.
Based on this, Waller believes interest rates should move closer to a “neutral” level, and the Fed could cut rates by up to 75 basis points if needed.
