key takeaways
- Today’s US inflation number settled at 8.6%, hitting a new 41-year high and well above economists’ expectations.
- Inflation is picking up again despite the Federal Reserve’s efforts to reduce it, indicating a bearish outlook for riskier assets such as stocks and cryptocurrencies.
- The two biggest cryptocurrencies, Bitcoin and Ethereum, are down 2.6% and 3.7% on the unexpected news.
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Consumer Price Index data shows the US annual inflation rate has hit a new four-decade record of 8.6%.
May prints CPI to four-decade high of 8.6%
US inflation data for May has topped economists’ expectations.
according to the latest data published According to the US Bureau of Labor Statistics today, the consumer price index rose 1% for the month in May, pushing the current annual inflation rate in the US to a 41-year high of 8.6%. The bureau’s report shows that prices have risen, with the cost of shelter, gasoline and food being the biggest contributors. The Shelter Index rose 0.6% in May, the most significant monthly increase since March 2004. Energy and gasoline indices rose 3.9% and 4.1%, respectively, after a temporary decline in April.
Last month’s temporary decline in inflation, which came 20 basis points lower than in March, with many economists believing inflation was likely already peaking and the Federal Reserve’s quantitative tightening policy will help keep it low in the coming months. according to a wall street journal In the survey, economists had estimated the May CPI at 8.3%, marking a significant miscalculation of 30 basis points.
Inflation remains strong despite Fed’s Efforts Raising key interest rates and slowly starting to open up their balance sheets could indicate a bleak future for riskier assets like stocks and cryptocurrencies. To bring inflation below its target rate of 2%, the Fed may have to start raising interest rates by more than 50 basis points at a time or increase the pace at which it opens its balance sheet. gives. This would make credit more expensive, reduce the circulating supply of money within the economy, reduce consumer demand for goods and services, and ultimately affect companies’ bottom lines.
Equities across the board have already been right in the news, with the Nasdaq-100 and S&P 500 indices falling 2.92% and 2.58% at the US market opening. The cryptocurrency market has not reacted well, with the two major coins, Bitcoin falling 2.6%, and Ethereum shedding 3.7% of its value. Smaller cryptocurrencies such as Aave, Chainlink, and Cardano were hit hard, each losing around 9%.
Disclosure: At the time of writing, the author of this article owns ETH and several other cryptocurrencies.