The “core” Consumer Price Index, viewed as a more stable inflation gauge, increased 6.6% from the previous year, reaching a four-decade high.
The Labor Department said Thursday that consumer prices in the United States dropped in September compared to the previous month. However, the inflation rate was still higher than what experts had projected.
In the minutes following the news release, Bitcoin (BTC) fell over 3% to its lowest level since September 21. At the time of publication, Bitcoin was traded for around $18,400. As a result of the Federal Reserve’s attempts to tame skyrocketing inflation, the values of risky financial assets, from equities to bitcoin, have declined.
Source: BTCUSDT on TradingView.com
The Consumer Price Index – the most widely followed indicator of inflationary pressure in the US – rose 8.2% in September from the same month a year ago, above the 8.1% increase predicted by analysts. The index climbed 0.4% from August to September.
The “core” CPI, which excludes volatile energy and food prices and is more carefully monitored by investors and policymakers since it is viewed as a more stable reflection of underlying price pressures, climbed 0.6%, the same rate as in August, beating forecasts by a significant margin. The core CPI jumped 6.6% over the previous year to its highest level in four decades.
When certain costs decrease, others increase. While the price of gasoline, which has been the primary cause of high inflation over the last few months, has continued to decline, prices for other goods have negated this trend and kept inflation at a high level.
For instance, health insurance increased by 28% annually, the most significant rise ever. Similarly, food was 13% more costly than a year earlier, and rents increased 7.2%, the most considerable rise in forty years.
Even though gas prices decreased marginally in September, experts anticipate a rebound in the following months due to the Organisation of the Petroleum Exporting Countries’ announcement that it will reduce output by 2 million barrels per day, which might lead to a rise in prices.
Michael Weisz, president of Yieldstreet, advised investors to monitor the continuing divergence in direction between headline and core indicators compared to earlier periods. “Core categories, such as housing costs, tend to be ‘stickier’ in price movements and can give insight into future inflation expectations.”
To drive inflation down to 2%, central bankers have hiked interest rates five times this year by 300 basis points, or 3 percentage points. However, they still have a long way to go. In a study by Bankrate, 43% of economists said that they believe inflation has not yet reached its high and will increase over the next 12 to 18 months.
According to the minutes of the September meeting of the rate-setting Federal Open Market Committee, released on Wednesday, central bankers expect rates to remain high unless prices decline significantly.
“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 declined substantially this year, may remain under pressure as traders stress the possibility of further high interest-rate rises by the Federal Reserve on November 1 and 2, when the FOMC meets next.