Dashing expectations for a slowdown, inflation rose to a four-decade high of 8.6% in May. bitcoin dipped below $30,000 on the news as hopes of a pause in Fed rate hikes are replaced with fears of an even faster pace of tightening. HeleneBraunn reports.
The consumer price index , the most widely tracked benchmark for inflation, rose 8.6% on a year-over-year basis in May, topping expectations that it would decline to 8.2% from April's 8.3%. The core CPI – which strips out food and energy costs – rose 6% year-over-year in May, dipping from April's 6.2%, but more than expectations for 5.9%.
The unexpected fresh four-decade high of 8.6% in headline inflation is problematic for monetary policymakers who are in the middle of a rate hike cycle, but may have been eyeing a pause at some point later this year. Now the question may be whether the Fed needs to raise rates by 75 basis points per meeting, rather than the planned 50 basis points.
“There are certainly positive signs that would indicate the worst [on inflation] is behind us,” said Jonathan Silver, founder and CEO of Affinity Solutions, a global insights firm tracking consumer purchasing habits. This morning’s inflation report is the last major economic indicator that the Federal Reserve sees before its next meeting on June 14-15, at which the central bank is widely expected to raise its benchmark Federal Funds rate by another 50 basis points, in what would be the third rate hike this year.at the possibility of pausing rate hikes in September if inflation moves in the right direction.
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