U.S. Inflation Rises Faster Than Expected in May
U.S. consumer prices jumped by 5% in the 12 months through May, the largest yearly increase since August 2008, and exceeding the 4.7% increase expected by economists.
Core CPI, which excludes food and energy prices, came in at 3.8% year-over-year, also higher than economists’ expectations of 3.5%.
The inflation figures, reported Thursday by the U.S. Labor Department’s Bureau of Labor Statistics (BLS), shows an economy that’s working through supply constraints while trying to meet increasing demand as the economy reopens, with business lockdowns ending and coronavirus vaccines reaching an ever-larger percentage of the population.
On a month-to-month basis, consumer prices rose 0.6% after rising 0.8% in April, according to the report. Excluding food and energy, the index rose 0.7% on the month.
“Our U.S. economists are of the view (shared by the Fed’s leadership) that this current episode is likely to prove temporary thanks to one-off factors such as those associated with the economic reopening and base effects,” wrote Deutsche Bank in a newsletter published on Thursday.
However, Deutsche Bank also published a report on Monday issuing a stark warning that inflation could send the global economy into recession as central banks lose control. The report was part of a research series highlighting tail-risks to the firm’s house view.
The CPI report is particularly important for some cryptocurrency investors who view bitcoin (BTC) as a hedge against inflation and ongoing currency debasement.
Since most of 2020 saw inflation around 1%, the Federal Reserve has yet to meet its target of seeing 2% inflation on average on an annual basis before raising rates.