Stable Market Minute - 14th May 2026: US PPI Surges to 6% as Fed Rate Cuts Look Dead

US producer prices jumped 6% year-on-year in April, bond yields spiked, and Fed rate cuts look firmly off the table — while UK GDP delivered a positive surprise.

Key takeaways

• US PPI hit 6% year-on-year in April, confirming broad-based inflationary pressure across the US supply chain.
• US 10-year yields jumped to just under 4.5%, reflecting bond market anxiety over the inflation outlook.
• Fed rate cuts in 2025 are now extremely unlikely; new Fed Chair Kevin Walsh inherits a difficult policy environment.
• UK Q1 GDP grew 0.6%, beating expectations, with production, construction, and services all outperforming.
• Crude oil has climbed back above $100/barrel after global supply missed over one billion barrels in two months.
• Trump's Beijing summit could shape AI cooperation and oil supply stability — two major variables for global trade costs.

US Producer Prices Surge 6% Year-on-Year

The US Producer Price Index (PPI) for April came in at 6% year-on-year growth and 1.4% month-on-month — a sharp reading that rattled bond markets but surprised few analysts. The print followed a hot Consumer Price Index earlier in the week, confirming that inflationary pressure remains firmly embedded across the US supply chain.

The practical effect was immediate in the Treasury market. US 10-year yields jumped 1.3%, settling just under 4.5% for April. That move signals that bond investors are repricing the timeline for any Federal Reserve easing — and the direction of travel is towards higher-for-longer.

Fed Rate Cuts in 2025 Now Look Extremely Unlikely

With both CPI and PPI running hot, the probability of a Federal Reserve rate cut this year has all but collapsed. Markets are increasingly pricing out any easing cycle in 2025, and the latest data gives the Fed little political or economic cover to move.

Adding a further layer of uncertainty, Kevin Walsh has now been confirmed by the Senate to replace Jerome Powell as Fed Chair. Walsh arrives with an ambitious agenda to reform and restructure the institution. However, he faces a difficult balancing act: managing political pressure from the White House on one side and an economy still absorbing significant inflation shocks on the other. The rhetoric around his intentions is clear — translating that into policy will be the real test.

Trump Heads to Beijing for High-Stakes Summit

President Trump is travelling to Beijing for a high-profile summit with Chinese leadership. The agenda spans several major themes: the global AI race, potential US-China cooperation on semiconductor production and energy costs, and — critically for commodity markets — efforts to restore stability in the Iran conflict.

A resolution in Iran would have direct implications for global oil supply. The world economy has already missed over one billion barrels of oil production across the past two months, a figure that underscores the scale of the supply disruption. Any diplomatic progress on that front could ease pressure on crude prices, though crude oil is currently trading back above $100 per barrel.

UK Q1 GDP Beats Expectations

Closer to home, the Office for National Statistics reported UK GDP growth of 0.6% for Q1 — a welcome upside surprise. Production, construction, and services all outperformed expectations, suggesting the UK economy entered 2025 with more momentum than many had anticipated.

Sterling responded with modest gains, though the rally was constrained by ongoing uncertainty around the broader political and fiscal landscape. Sterling/dollar is trading at 1.3510, euro/dollar at 1.1710, and sterling/euro at 1.1540.

Market Snapshot: Rates, FX, and Commodities

US 10-year Treasury yield: just under 4.5%. GBP/USD: 1.3510. EUR/USD: 1.1710. GBP/EUR: 1.1540. Crude oil (WTI): above $100 per barrel. Bond markets remain twitchy as investors continue to reassess how persistent inflation will affect the broader global economy.

Next steps

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