The United States consumer price index rose to 4.2% in the 12 months through April, growing at the fastest pace since 2008 according to the Labour Department’s Bureau of Labour Statistics (BLS).
The latest reading on the Consumer Price Index (CPI) inflation report exceeded expectations of an average estimate for a 3.6% increase, and it compares with a 2.6% increase reported last month.
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The report is particularly important for investors looking for an inflationary hedge and ongoing currency debasement through various machinations of central banks. However, concerns about inflation beyond the 2% threshold might tempt the Federal Reserve to eventually tighten monetary policy and the country reopens, which could weigh on risk assets.
Findings in brief
- On a month-to-month basis, headline April CPI increased 0.8%, surpassing expectations for a 0.2% rise after a 0.6% gain in March.
- The index for all items less food and energy rose 0.9% in April, the largest monthly increase since April 1982.
- Nearly all major components of the CPI increased in April, including prices for used cars, trucks, shelter and airline fares – a sign that built-up demand is fueling a rebound in economic mobility.
Meanwhile, US stocks slumped for a third day and bond yields increased after the report, according to Bloomberg. Bitcoin is currently down around 10% since Wednesday as various signs of market froth were realised after an Elon Musk tweet. Cryptocurrencies have been on a tear for the past six months as the market cap surged over $1 trillion due to various tailwinds – expectations of imminent inflation being a strong factor.
After the report, Chief economist at Pantheon Macroeconomics wrote in an email: “The Fed is not going to panic after one startling CPI report, so you can expect to hear even more about transitory bottleneck inflation pressures over the next few weeks. But this report does mean that the first part of the higher inflation story – the reopening spike – is real.”
Bitcoin is up approximately 470% year-to-date, exchanging hands at $50,000 at the time of writing. Morgan Creek’s chief investment officer, Mark Yusko expects the cryptocurrency could reach $250,000 within five years or sooner, in large part due to infinite global money supplies.
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