Inflation in the US Jumps to a New 4-Decade High of 8.5 Percent in March
The Consumer Price Index in the United States increased last month as supply constraints and war-related restrictions drove already-high inflation higher.
The Consumer Price Index (CPI) of the United States Labor Department, a commonly used indicator for measuring growing living expenses, increased faster than predicted in March to a four-decade high of 8.5 percent, as supply-chain problems and the Ukraine crisis drove up oil and food prices.
The headline CPI, which covers prices for essential necessities such as food, housing, transportation, energy, and consumer goods, has reached its highest level since December 1981, according to the Labor Department. According to the FactSet database, analysts and economists forecasted an 8.4 percent inflation rate in March.
Core inflation, which excludes seasonally volatile food and energy costs, increased by 0.3 percent in February, less than the 0.5 percent projected by economists.
Bitcoin (BTC) investors eagerly monitor the CPI data because the biggest cryptocurrency by market capitalization is seen as a hedge against inflation and currency depreciation.
Investors dumped risk assets such as stocks and cryptocurrencies in anticipation of a jump in inflation prompting the Federal Reserve to expedite monetary tightening and rate increases.
Bitcoin’s correlation with the Nasdaq 100 index recently reached a record high, but it fell below $40,000 on Monday. As of press time, Bitcoin (BTC) was trading at roughly $40,509.
“In my opinion, the Federal Reserve will see the latest CPI statistics as a reinforcement of their strategy for controlling inflation,” Howard Greenberg of Prosper Trading Academy told CoinDesk.
“If [Fed governor Lael] Brainard demonstrates the confidence that rate increases and quantitative tightening will proceed on the previously planned timetable, it may instill confidence in retail and institutional investors to return to markets, including cryptocurrencies.” Lael Brainard is expected to respond to questions regarding inflation, interest rates, and the employment market at the Wall Street Journal Jobs Summit on Tuesday at 12:10 p.m.
Inflation in the United States was already near four-decade highs, only to be compounded last month by supply chain delays and high energy costs caused by Russia’s destruction of Ukraine.
Western nations, headed by the United States, placed broad sanctions on Russian commerce and banking after Russia’s invasion of Ukraine on Feb. 24. Russia is one of the world’s top exporters of commodities and natural resources.
Jen Psaki, the White House Press Secretary, warned Monday that the Biden administration anticipated March CPI headline inflation figures to be “extraordinarily high,” blaming the conflict in Ukraine and Russian President Vladimir Putin for the surge, which she attributed to “Putin’s price hike.”
The huge difference in inflation rates between headline and core inflation (8.5 percent vs. 6. percent over the previous 12 months) may be explained by the faster increase in food and energy costs.
The energy index surged 32% year over year, while the food index grew 8.8%, the biggest 12-month gain since May 1981.