U.S. inflation has grown at its fastest rate in four decades, exerting more pressure on risk assets
Bitcoin, the world’s premier cryptocurrency, fell to an intraday low of $29,453 after US inflation hit its highest level since 1981.
According to data provided by the United States Department of Labor, the consumer price index (CPI) rose 8.6% in May, beating analysts’ expectations.
The US Federal Reserve now faces even greater pressure to raise interest rates to rein in rising inflation.
After consumer prices blew past expectations, it has become clear that inflation is yet to reach its peak, contrary to what investors predicted a year ago.
Inflation has soared around the world due to supply chain issues as well as rapidly rising energy prices.
The U.S. stock market opened in the red, with the benchmark S&P index shedding more than 2%.
Three-year US Treasury yields hit 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 the report on the CPI warmer than expected.
Investors expect the U.S. Federal Reserve to maintain its hawkish monetary policy to assuage inflation-related concerns.
The central bank is expected to implement a 50 basis point hike at a meeting next week.
Lael Brainard, vice chair of the Federal Reserve, recently stated that the Fed would change course only if inflation were to come down.
Earlier this week, Treasury Secretary Janet Yellen conceded the level of inflation was “unacceptable” during a recent congressional hearing.
In November, Bitcoin briefly topped $69,000 for the first time on a CPI report that showed the highest inflation growth since late 1990. However, the cryptocurrency failed to serve as an inflation hedge and started performing in line with other risk assets as investors realized that the central bank would have to start aggressively hiking rates.
As reported by U.Today, Galaxy Digital CEO Mike Novogratz recently opined that Bitcoin will only be able to start another rally if the Fed pulls back.
