April PPI came in at 1.4% for the month — nearly three times the 0.5% estimate and the biggest monthly gain since March 2022. Annual PPI hit 6.0%, the highest since December 2022. Services drove 60% of the increase. The Boston Fed’s Collins just put rate hikes on the table. And futures markets now price a 39% probability of a hike by year-end. Yesterday’s CPI was the consumer-facing shock. Today’s PPI is the warning about what’s coming next.
Two inflation prints in two days. Yesterday’s CPI confirmed that consumer prices are running at 3.8% — the highest since May 2023, with real wages going negative for the first time in three years. Today’s PPI confirmed something more concerning: the inflation pipeline above the consumer level is running even hotter, and the pressure is no longer coming only from energy. The two prints together are the most important back-to-back inflation data release for consumer lending since the March 2022 rate cycle began.
The Bureau of Labor Statistics released the April Producer Price Index this morning. Final demand PPI rose 1.4% for the month — nearly three times the 0.5% Dow Jones consensus forecast and the largest monthly gain since March 2022. On an annual basis, PPI hit 6.0% — the highest since December 2022 and well above the 4.9% estimate. March was revised upward to 0.7% from the initially reported 0.5%.
The sector breakdown is the most important part of the report. Final demand goods rose 2.0%, led by a 15.6% monthly surge in gasoline — consistent with the energy story that has dominated since February 28. But final demand services rose 1.2% — the largest monthly services gain since March 2022 — and services accounted for nearly 60% of the total PPI increase. Two-thirds of the services gain came from a 2.7% jump in trade services margins — the markup charged by wholesalers and retailers — with machinery and equipment wholesaling margins up 3.5%. Truck transportation of freight, chemicals wholesaling, and legal services all rose meaningfully.
TradeStation global head of market strategy David Russell described the data precisely: “Inflation is sticky and accelerating. The core reading confirms a deeper structural trend, especially in services. The Hormuz crisis is aggravating the problem, but this goes way beyond oil.”
Energy prices are volatile. They spike with geopolitical events and they fall when those events resolve. A 15.6% monthly gasoline spike driven by the Strait of Hormuz blockade can reverse in weeks if the ceasefire holds and tanker traffic resumes. Markets have already priced in some mean reversion in energy once the conflict stabilizes.
Services inflation is different. It reflects wages, long-term contracts, lease obligations, and structural operating costs that do not reverse when oil prices fall. A 1.2% monthly gain in services PPI — with trade margins and transport costs driving the move — is a signal that the energy shock is now being absorbed and passed through the production and distribution chain in ways that will persist even after the immediate geopolitical trigger eases. This is how transitory energy shocks become embedded inflation: when producers absorb higher input costs and then pass them through to the next stage of the supply chain, the price increase becomes structural rather than temporary.
The pipeline implication for consumer prices is specific. PPI leads CPI by approximately 60-to-90 days as producer cost increases work their way through the supply chain to retail prices. April’s 6.0% annual PPI — driven by both energy and services — is telling you what the May and June CPI prints are likely to show before BLS publishes them. The disinflationary narrative that dominated the second half of 2025 is not just paused. It is running in reverse.
Boston Federal Reserve President Susan Collins, speaking at the Boston Economic Club today, became the most direct Fed official to put rate hikes on the table as a live policy option. “While it is not in my most likely outlook, I could envision a scenario in which some policy tightening is needed to ensure that inflation returns durably to 2% in a timely manner.” Collins noted that more than five years of above-target inflation have reduced her patience for the standard textbook approach of looking through supply-side price shocks. “The likelihood of other scenarios — with higher and more persistent inflation, more adverse labor market outcomes, or both — has increased.”
Collins is not a voting FOMC member in 2026, but her comments reflect a broader shift in the Fed’s internal posture. She aligned herself with the three regional presidents — Hammack, Kashkari, Logan — who dissented at the April 29 meeting to remove the easing bias from the statement. Collins’s modal scenario projects inflation accelerating to slightly above 3.5% in coming months before easing toward 3% by year-end. But she explicitly flagged that the modal scenario requires the Iran conflict to stabilize and the Strait of Hormuz to reopen on a reasonable timeline. The longer the conflict drags on, the more the alternative scenarios — with higher, more persistent inflation — gain probability.
The market reaction was immediate. Futures markets moved the probability of a rate hike by December 2026 from approximately 9% before the PPI release to 39% following the Collins speech. That is not a tail risk anymore. A 39% probability of a rate hike by year-end is a scenario that belongs in every consumer lender’s rate sensitivity model.
The rate-hike scenario is now a planning requirement, not an edge case. At 39% probability, a year-end rate hike belongs in your stress scenarios with the same weight as your base case. A 25 basis point hike from 3.5–3.75% to 3.75–4.0% in December 2026 would extend the elevated cost-of-funds environment into 2027 and further compress the real income of variable-rate borrowers. Model it now, before it is a consensus view.
The PPI services surge means consumer price relief is not coming in May or June. The 60-to-90 day pipeline from producer to consumer prices means the May and June CPI prints — releasing June 10 and July 10 — will reflect April’s PPI pressure. The disinflation that was projected by consensus at the start of 2026 is not arriving on schedule. Reserve builds that assumed a Q3 consumer credit improvement need to be reviewed against a scenario where inflation stays above 3.5% through Q3.
Real wages at -0.3% annually combined with 6.0% PPI is the most adverse consumer credit environment since 2022. Producers are paying more. Those costs are being passed through to retail prices. Consumers are paying more. Their nominal wages are not keeping up. The gap between what consumers earn and what they pay is widening — and it is widening at the same time that the savings buffer built during 2021–2023 has been exhausted for lower-income households. The credit stress transmission described in earlier PulseDaily coverage is now confirmed by the upstream price data. June delinquency data will be the downstream confirmation.
Separate from today’s inflation data, Affirm held its first investor forum since 2023 and unveiled Affirm Edge — a new product that embeds Affirm’s BNPL and installment loans directly inside banking apps. The product allows bank customers to see their Affirm purchasing power, browse the lender’s marketplace, and initiate loans without leaving their bank’s mobile app. CEO Max Levchin described the banking distribution channel as the company’s largest untapped opportunity: “My theory for a long time has been, there has to be one [bank] that says ‘I’m live and it’s great,’ and then it will be everyone.” Old National Bank’s president of consumer lending, Phil Lehner, confirmed talks with Affirm and disclosed that Old National processed over $60 million in BNPL transactions last year with 40,000 active pay plans.
Affirm’s medium-term targets from the investor forum: annual GMV growth above 25%, with a $100 billion trailing-12-month GMV target over the medium term. The total addressable market for Affirm Edge is estimated at $140 billion. American Banker’s BNPL survey found that 22% of banks without BNPL cited regulatory concerns as the primary barrier — and 44% currently offer BNPL through proprietary, white-label, or embedded partnerships. Affirm is betting that the combination of Affirm Edge and regulatory clarity under the current administration tips the remaining 56% toward adoption.
The lending read: For consumer lenders, Affirm Edge is a distribution threat and a partnership opportunity simultaneously. If Affirm successfully embeds its underwriting and loan product inside the digital banking experience of regional and community banks, it captures point-of-decision credit demand that those banks would otherwise lose to standalone BNPL apps. The bank retains the customer relationship. Affirm captures the credit economics. For non-bank consumer lenders without a banking app distribution channel, the competitive implication is that the most valuable real estate in consumer lending — the moment of purchase decision — is being systematically captured by Affirm’s distribution network.
Paul Gu — Upstart’s co-founder and longtime CTO — officially became CEO this month, with former CEO Dave Girard moving to executive chairman. Gu’s first major public interview, with American Banker’s Penny Crosman, covered his views on credit access, AI underwriting, and where Upstart is heading. His core thesis is unchanged from the company’s founding mission but more precisely stated after a decade of data: “Credit access is absolutely a problem. Too many Americans don’t have access to bank-quality credit, or they do have access, but it takes a sort of long and arduous process to get there.”
Gu acknowledged that the total industry transformation Upstart expected has been slower than anticipated — the company has served approximately 4 million customers since founding, which is meaningful but not the systemic shift the original thesis imagined by this point. His view on why: the inertia of traditional credit scoring and bank underwriting infrastructure is more durable than expected. His view on what changes it: AI capabilities in 2026 that simply didn’t exist five years ago, applied not just to credit decisioning but to every layer of the lending operation — from underwriting to servicing to collections to product development.
On the bank charter application: Gu described it as consistent with Upstart’s model, not a departure from it. Upstart’s banking partnerships remain central. The charter is additive — reducing funding costs and expanding product flexibility rather than replacing the partner network. On the inaccuracy gap: Gu’s frame is that the AI underwriting model has closed approximately 12.6% of the distance to a theoretically perfect model since 2018, leaving 87.4% of the potential accuracy improvement still ahead. That remaining gap is the competitive moat Upstart is building toward — and the reason Gu believes the AI underwriting advantage will compound over time rather than plateau.
The lending read: Gu’s appointment as CEO signals continuity of the technical vision combined with a sharper commercial focus. He is a co-founder with deep model expertise and credibility with institutional capital partners who have now committed over $4 billion in forward flow agreements in 2026. The credit access mission and the AI accuracy compounding thesis are the two frames that explain every strategic decision Upstart makes — from the bank charter application to the super prime mix shift to the auto and home loan expansion. For lenders evaluating Upstart as a partner or a competitive reference point, Gu’s interview is the clearest articulation of the company’s next five years you will find in a public forum.
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