Key takeaways:
- The latest data from the Bureau of Labor Statistics showed that core inflation in the US recorded an 8.3% yearly increase in August
- The increase came as a surprise, as most experts forecasted a modest drop in inflation levels in August
- Both crypto and traditional assets plunged after the report was released
The CPI for August was 8.3%, beating experts’ expectations of 8.1%
On Monday, the U.S. Bureau of Labor Statistics released a new report on the Consumer Price Index (CPI). After a month of stagnation in July, the CPI increased by 0.1% in August, raising concerns over the prospects of the U.S. Federal Reserve’sincreasingly restrictive monetary policy.
According to a Bloomberg report, all sectors – including food, medical care, and transportation – recorded a bigger price growth than it was forecasted. While the experts anticipated an 8.1% rate of annual CPI growth in August, the real figures showed an 8.3% growth.
On a positive note, energy prices decreased by 5% compared to July, primarily due to the falling gasoline and fuel oil prices.
It is widely expected that the Fed will announce another 75 basis point interest rate hike – a third one this year – to combat rising inflation. The Federal Open mark Committee (FOMC) noted as much in a report last month, saying that the Fed would continue raising interest rates as long as the inflation is curbed back to 2%.
It is worth noting that crypto assets, much like other expansionary assets like tech stocks, perform best in low-interest rate conditions featuring easy access to money and a more lax investment environment.
$1.6 trillion erased from the stock market, Bitcoin dropped to $20k
Poor core inflation data, along with fear of additional interest rate hikes, have contributed to a sudden drop in the value of crypto and most traditional assets on Monday. Virtually every major US stock was down on the day, leading to $1.6 trillion being wiped out from the market.
A similar story played out in the crypto sector, with Bitcoin losing roughly 10% and dropping from $22,500 to $20,500 following the release of new CPI data. In total, 95 out of the top 100 digital assets (excluding stablecoins) ended the day in the red zone.
With another 0.75% increase in the federal rate looming, the markets are likely to experience more volatility in the coming days. The next FOMC meeting is slated for September 20-21.
