Inflation rises again in June, Bitcoin crashes, stocks open lower

Annual inflation rose again in June, exceeding analysts’ expectations of reaching 9.1%, the highest level since 1981, according to the latest consumer price index (CPI) released on Wednesday.

The core CPI, which excludes volatile food and energy prices, reached 5.9% in the 12 months ended June.

Bitcoin and ether both plummeted immediately after the release of the report, losing 2.5% and 3.4% respectively. The shares also opened lower at the start of Wednesday’s trading. The technology-heavy Nasdaq lost 1.6%, and the S&P 500 started the day 1.4% lower.

Analysts were not surprised by the market’s reaction, as investors move away from risk assets as prices continue to rise.

“You have decades of high inflation, low economic growth and [the] “the end of simple monetary policy,” said Fawad Razaqzada, financial market analyst at investment firm City Index.

Wednesday’s figures paint an unfortunate picture for Federal Reserve officials trying to curb inflation. In June, central bankers chose to raise interest rates by 75 basis points, and analysts expect an equal or larger increase later this month, which put an end to the pandemic’s strategy.

The producer price index (PPI) report will be published on Thursday, which shows how prices are rising from the manufacturers’ perspective. The Fed’s preferred measure of inflation is the core price index for personal consumption expenditure, PCE, which will be published on 29 July.

“As much as the KPI matters, there is a mindset that says that the PPI provides useful information about the direction of consumer inflation,” said Nicholas Colas, co-founder of DataTrek Research. “If producer inflation has reached its peak and is beginning to decline, consumer inflation should follow in the same direction as it is the last stop on the road starting with commodities and ending with personal consumption.”

The shift in risk assets is likely to continue, Razaqzada said, and cryptocurrencies are guaranteed to struggle in the foreseeable future.

“It’s no surprise why investors are so bearish on crypto right now,” Razaqzada said. “The way prices have collapsed makes you wonder if cryptocurrencies will ever experience the same kind of craze we saw after Covid and earlier in 2017 … troubled crypto borrowers, worthless coins, problems withdrawing funds and collapsed hedge funds emphasize the risk investors face. “

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