“While almost all major components increased over the month, the largest contributors were the indexes for shelter, airline fares, used cars and trucks, and new vehicles,” the announcement from the US Bureau of Labor Statistics said.
Contrary to what was expected, today’s inflation number means that a peak in inflation in the US was not reached in March, when the headline consumer price index (CPI) hit 8.5%.
Market participants widely expected the year-over-year inflation number for May to come in unchanged from the month before, according to a Dow Jones survey.
Meanwhile, the so-called core-CPI, which excludes prices on food and energy, came in at 6% year-over-year, down from 6.2% a month earlier.
The consensus among analysts was a core-CPI reading of 5.9%.
Following the release, bitcoin fell to a low of around USD 29,500, before trimming some of its losses. As of 13:00 UTC, 30 minutes into the release, BTC traded at USD 29,660, down about 1.5% on the news. At the same time, ethereum (ETH) traded at USD 1,731, down about 2.7% since the inflation figure came out.
Stocks also generally reacted by trading lower, with S&P 500 stock index futures falling by about 1.5% during the same 30 minutes.
Commenting on the higher-than-expected inflation number, crypto trader and economist Alex Krüger simply called it “horrible.” Others agreed, with for instance Scott Melker, another crypto trader and podcaster, better known as The Wolf of All Streets, saying the US Federal Reserve (Fed) is “gonna come out blazing.”
Citing an unnamed official in the Biden Administration, the Financial Times wrote before the release that supply chain disruptions from COVID-19-related lockdowns in China, as well as the war in Ukraine, are likely to have maintained “upward pressure on inflation in May.”
Also commenting ahead of the release of today’s inflation numbers, Moody’s Analytics chief economist Mark Zandi called the consensus “a very disquieting number.”
“It’s going to re-energize concerns about has inflation peaked,” Zandi was cited by CNBC as saying, before adding that “I think we peaked.”
Others, however, were less sure that the peak has been reached, with Wells Fargo senior economist Sarah House saying in the same article that she does not expect inflation has peaked since she sees more upside for oil prices.
“We’ve seen gasoline hit record levels. And naturally what’s prevented the peak from being behind us is what’s coming out of the energy sector,” House, who expected a headline CPI figure of 8.4%, said.
From the crypto-native world, Marcus Sotiriou, an analyst at digital asset broker GlobalBlock, said in an emailed comment that today’s CPI number will “heavily impact” interest rate decisions from the Fed, and that volatility should be expected.
“[It is] a highly anticipated event that will create volatility,” Sotiriou said.
The Fed’s vice-chair, Lael Brainard, on June 2 said that the central bank could continue with half-point rate increases through September, and that it would only consider the more typical quarter-point increments after seeing a “deceleration” in monthly inflation numbers.
Meanwhile, China also released its inflation figures for May on Friday, with the year-over-year CPI figure coming in at 2.1%, a far cry from the high inflation levels that are plaguing Western nations.
The Chinese inflation print was slightly below analysts’ expectation of 2.2%, and leaves room for the Chinese government to “increase stimulus further,” China-focused economist David Qu was quoted by Bloomberg as saying.
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(Updated at 13:19 UTC: updated throughout the entire text.)