According to a current report, inflation in the US has surged to its highest since 2008.
The Core Price Index which excludes food and energy also hit its highest since 1992.
The price of Bitcoin historically correlates with inflation in the US. This is mostly because many turn to the asset to hedge against inflation. According to a current report, inflation in the US has surged to its highest since 2008.
A report shared by the US Bureau of Labor Statistics estimates that inflation has steadily risen from 1.4 percent since January. The consumer price index moved from 4.2 percent in April to 5 percent in May. The Core Price Index which excludes food and energy also hit its highest since 1992. It recorded a 3.8 percent move year on year, and a 3 percent move since May. The cost of used cars surged by 7.3 percent from April to May. As claimed by the report, the price from the previous year was up by 29 percent.
Energy prices were not spared either as they increased by 28.5 percent year on year. The report further reveals that the cost of flights, rental cars, used cars, households, furnishing, and clothing surged in May. Adam Crisafulli, founder of Vital Knowledge believes that inflation will abate in the coming months.
This CPI isn’t likely to change the narrative dramatically, and there are still indications that inflation momentum is set to abate in the coming months.
It has also been revealed that the Federal Reserve has sold $160 million of its corporate debt holding. This began with the FEDs selling their share of the 16 bond Exchange Traded-Funds (ETF). According to European Central Bank President Christine Lagarde, inflation is inevitable as the economy seeks to get back on track.
The stock market responds strongly to inflation, Bitcoin looks bullish
Though the high rate of inflation has been a cause for concern as investors expect a tightened monetary policy caused by higher interest rates, the stock market has reacted strongly.
#Inflation is rising but the bond market seems to ignore the data.
For now it is still possible to blame the base effect for inflation.
But the further we are moving away from March the less likely it is to be just transitory… pic.twitter.com/Mob3sCGDAf
— ecoinometrics (@ecoinometrics) June 10, 2021
Higher inflation technically decreases the purchasing power of the US Dollar. This forces individuals and institutions to retreat from the US Dollar to take shelter in assets that historically hold value or appreciate. This explains why S&P 500 responded by rising to an all-time high of $4249 on Thursday. The Bitcoin price is slowly moving up on the price curve with a current price of around $35,000 after falling to as low as $32,000 in the past few days.
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