The U.S. Labor Department’s Consumer Price Index (CPI), a widely used metric to gauge rising costs of living, rose faster than expected in March to a four-decade high of 8.5% as supply-chain woes and war in Ukraine pushed energy and food prices higher.
The headline CPI, which includes prices for all items basic for living such as food, housing, car, energy, consumer products, is now at its highest since December 1981, the Labor Department said Tuesday. Analysts and economists had estimated an 8.4% inflation rate in March, according to the FactSet database.
Core inflation, which excludes seasonally volatile food and energy prices, rose 0.3% compared with the prior month, which was slower than the 0.5% expected by analysts.
The CPI report is closely followed by bitcoin investors, since the largest cryptocurrency is seen as a hedge against inflation and currency devaluation.
Investors sold off risk assets such as stocks and cryptocurrencies amid fear that a spike in inflation prompts the Federal Reserve to accelerate monetary tightening and rate hikes.
Bitcoin, which recently hit a record-high correlation with the Nasdaq 100 index, dipped below $40,000 yesterday as news came out about higher than expected inflation.
Bitcoin price
Bitcoin (BTC) was changing hands around $40,509 as of press time.
Inflation in the U.S. already was at levels not seen in four decades, only to be exacerbated by supply chain disruptions and high energy prices because of Russia’s war on Ukraine in March.
Western countries led by the U.S. imposed wide-scale sanctions on Russian trade and banks, one of the globe’s largest exporters of commodities and natural resources, after Russian President Vladimir Putin announced “special military operation” and troops invaded Ukraine on February 24, 2022.
White House press secretary Jen Psaki warned Monday that the government expected the March CPI headline inflation to be “extraordinarily elevated,” and shifted the blame to the war and Russian President Vladimir Putin explaining the surprise inflation data as “due to Putin’s price hike.”
The large gap between the headline and core inflation can be explained by the accelerated rise in food and energy prices.
The energy index rose 32% over the last year, and the food index increased 8.8 percent, the largest 12-month increase since the period ending May 1981.