US Inflation Faster Than Expected in September; Bitcoin Falls
U.S. consumer prices in September slowed from the prior month, the Labor Department reported Thursday, but the inflation rate was still faster than economists had predicted.
Bitcoin (BTC) tumbled nearly 3% in the minutes after the report to the lowest since Sept. 21. As of press time the largest cryptocurrency was changing hands around $18,400. Crypto traders track monthly inflation figures closely, since the Federal Reserve’s efforts to temper soaring inflation have pushed down prices for financial assets seen as risky, from stocks to bitcoin.
The consumer price index (CPI) – the most widely watched gauge to track inflationary pressure in the U.S. – rose 8.2% in September from the same month a year ago, slightly higher than the 8.1% forecasted by economists. On a monthly basis, the index rose 0.4% in September.
The "core" CPI, which strips out volatile energy and food prices and is more closely watched by investors and policy makers because it’s seen as a more steady indicator of underlying price pressures, rose at the same pace as in August, by 0.6%, well exceeding expectations. Versus 12 months ago, the core CPI rose 6.6%, the highest in four decades.
While prices for energy, which were the main driver for high inflation in recent months, cooled off further, prices for new cars and rents offset those price decreases and kept overall inflation at a high level.
Investors should be attentive to “continued divergence in direction between headline and core measures as compared to prior periods,” Michael Weisz, president of Yieldstreet said. “Core categories, such as housing costs, tend to be ‘stickier’ in terms of price movements, and can give insight into future inflation expectations.”
Central bankers have raised interest rates five times this year so far, by 300 basis points, or 3 percentage points, in an effort to bring inflation down to 2%, but they have a long way to go. In a survey conducted by Bankrate, 43% of economists even think that inflation hasn’t peaked yet and will be more significant over the next 12-18 months.
According to the minutes from the FOMC's September meeting, released on Wednesday, central bankers indicated that they expect rates to be high until prices come down sharply.
“They had raised their assessment of the path of the federal funds rate that would likely be needed to achieve the Committee’s goals,” according to the document, with inflation “showing little sign so far of abating.”
Bitcoin, which has fallen dramatically this year, could stay under pressure as traders fret over the prospect of further steep interest-rate hikes by the Federal Reserve on Nov. 1-2, when the Federal Open Market Committee (FOMC) meets next.