NordFX: CPI vs PPI: Which Inflation Report Matters More for the Dollar?

Two reports. Two days. One very clear message for the USD.

CPI (May 13): Headline inflation hit 3.8% year-on-year in April — the highest since May 2023 — up from 3.3% in March. Energy surged 17.9% annually, gasoline +28.4%, shelter +0.6% for the month. Core CPI came in at 2.8% YoY, above the 2.7% forecast. Real wages fell 0.5% for the month. For the first time in three years, paychecks are losing ground to prices.

PPI (May 14): Producer prices jumped 1.4% MoM — nearly 3x the 0.5% consensus — and 6.0% YoY, the highest annual reading since December 2022. Services drove nearly 60% of the increase, its biggest monthly gain since March 2022. That is the detail that worries the Fed most: services inflation is sticky. 🔥

So which one moves the dollar more?

CPI triggers the immediate reaction — it directly shapes rate bets. PPI is the leading signal: when producer costs run at 6% while consumer prices sit at 3.8%, the gap is unsustainable. Either margins get crushed or costs pass through to consumers — keeping future CPI hot. Right now, both reports are pointing the same direction. 📈

The market reaction this week: The Dollar Index climbed to 98.26 after the PPI print. The 2-year Treasury yield rose to 4.02%. Rate hike odds for December 2026 jumped to ~39%, with the Fed holding its benchmark rate at 3.5%-3.75% and cuts essentially priced out for the rest of the year.

The backdrop: The US-Iran war has sent gasoline above $4.50/gallon nationally — up ~50% since the conflict began in late February. Tariffs are amplifying pressure at the producer level. The Fed is caught between a resilient labor market, sticky core inflation, and a geopolitical energy shock it cannot control. Incoming Fed Chair Kevin Warsh takes over Friday — squaring his dovish lean with 3.8% CPI won’t be easy. ⚡

Bottom line: Watch the CPI-PPI spread. When producer prices consistently outrun consumer prices, the pipeline stays pressured, rate cuts stay off the table, and the dollar stays bid.

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NordFX: CPI vs PPI: Which Inflation Report Matters More for the Dollar? 📊 was originally published in Coinmonks on Medium, where people are continuing the conversation by highlighting and responding to this story.