US inflation rises at its fastest rate in four decades, putting more pressure on riskier assets
Bitcoin, the world’s top cryptocurrency, fell to a low of $29,453 after hitting the highest level of US inflation since 1981.
The consumer price index (CPI) rose 8.6% in May, beating analysts’ expectations, according to data provided by the United States Department of Labor.
The US Federal Reserve is now facing even more pressure to hike interest rates to contain rising inflation.
As consumer prices broke past expectations, it became clear that inflation was yet to hit its peak, contrary to what investors had predicted a year ago.
Inflation has increased worldwide due to supply-chain issues as well as rapidly rising energy prices.
The US stock market opened in the red, with the benchmark S&P index down over 2%.The US three-year Treasury yield rose to 3.142%, the highest level since late 2007. Meanwhile, the US dollar index climbed to 103.74, hitting its highest level in three weeks due to a warmer-than-expected CPI report.
Investors expect the US Federal Reserve to maintain its bullish monetary policy to address inflation concerns.
The central bank is widely expected to implement the hike of 50 basis points at a meeting next week.
Federal Reserve Vice President Lyle Brainard recently said that the Fed will only change if inflation subsides.
Earlier this week, Treasury Secretary Janet Yellen acknowledged that inflation levels were “unacceptable” during a recent congressional hearing.
In November, bitcoin topped $69,000 on the CPI report for the first time, showing the highest inflationary growth since 1990. However, the cryptocurrency failed to act as an inflation hedge and began to perform in line with other risk assets as investors realized that the central bank would have to start raising rates aggressively.
As reported by U.Today, Galaxy Digital CEO Mike Novogratz recently said that bitcoin will only be able to launch another rally if the Fed hesitates.