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Key takeaways:
- The latest report from the Bureau of Labor Statistics showed that CPI increased to 9.1% in June 2022
- Both the 12-month and month-over-month increases in June were higher than Dow Jones anticipated
- Bitcoin dropped 5% on the news of growing inflation
CPI increased to 9.1% in June 2022 compared to a year ago, more than experts anticipated
The Bureau of Labor Statistics published a report on the Consumer Price Index (CPI) for the month of June on Wednesday. According to the agency’s findings, consumers paid on average 9.1% more for food, energy, and other essentials in June 2022 compared to the same period last year. The Bureau commented on the record-breaking CPI levels:
“The all items index increased 9.1 percent for the 12 months ending June, the largest 12-month increase since the period ending November 1981.”
The large increase in CPI can be attributed primarily to the surging prices of energy, which increased on average by more than 41% in the past 12 months. Moreover, the rising costs of energy commodities, including gasoline and fuel oil, saw a 7.5% increase in the month-long period between May and June alone.
According to a CNBC report, the CPI figures in June beat Dow Jones estimates by a considerable margin. Down Jones expected an 8.8% year-over-year (YoY) increase in CPI – compared to the real rate of 9.1% – and a 1.1% monthly increase in headline CPI, compared to 1.3% reported by the Bureau.
12-month CPI chart for the past 20 years. Image source: U.S. Bureau of Labor Statistics
The Federal Reserve has implemented a series of interest rate hikes throughout 2022 to reign in the rapidly increasing commodity prices. The central bank authorized the biggest interest rate increase in 28 years in mid-June, raising the benchmark rate by 0.75% in one fell swoop. The leading financial institution said at the time it could raise the rates up to 3.4% by the end of the year in a series of four meetings. For context, the current rate is roughly 1.5%.
On Tuesday, a day before the June report was released, a money market economist at Jefferies, Tom Simmons, outlined two potential scenarios when talking with CNBC. Simmons said that if June inflation “comes in higher than expected,” it will likely mean a peak has been reached. Conversely, if the figures were to come in lower than expected, markets would likely rally. “Either way, we’re going to end up with some kind of relief rally,” the market analyst remarked.
The inflation rate beating estimates spooked cryptocurrency investors earlier today – Bitcoin, for instance, shed 5% in the span of roughly an hour after the report went live, dropping from $19,920 to $19,000. The world’s largest cryptocurrency has since rebounded to the $19,500 level.