Latest US consumer price index (CPI) report signals more rate hikes from Fed despite drop in inflation 

Key Takeaways:

• The US inflation rate down to 3% in June
• The latest CPI report suggests a significant drop in inflation from last year’s 9.1%
• Economists believe the US Federal Reserve will hike interest rate later this month

YEREVAN (CoinChapter.com) — In the latest consumer price index (CPI) report, the Bureau of Labor Statistics revealed that annual inflation in the United States slowed down to 3% last month. This marks a significant decrease in a short span of one year. In June 2022, when pandemic-related supply chain issues collided with surging consumer demand, inflation surged to 9.1%, reaching its highest annual rate since November 1981. 

The current annual rate is lower than May’s 4% and slightly below the expectations of economists who anticipated a 3.1%. The latest CPI figures mark the smallest year-on-year increase in the prices of goods and services since March 2021.

Examining the monthly figures, core inflation reached 4.8%, a modest increase of 0.2% compared to May’s 0.4% rise, as indicated in the report. This is below the respective 5% and 0.3% which economists expected to see. 

Housing prices, which soared during the pandemic, continue to be a major driver of core inflation. As per the report, housing prices have spiked by 7.8% over the past year.

Real estate experts, meanwhile, see the latest CPI report as good news for the market.

“With the annual inflation dropping to 3% last month this will give the market a lot of confidence. This will apply to all markets such as crypto, real estate, and equities,”  

Sebastian Jania, founder of Ontario Property Buyers, told CoinChapter. 

More price hikes ahead by the Federal Reserve? 

Despite the ongoing decline in inflation, price increases persist above the Federal Reserve‘s annual target rate of 2%. This suggests the possibility of additional interest rate hikes in the future.

To curb inflation, the Fed has implemented a series of ten consecutive interest rate hikes since March 2022. Last month was the first time the agency decided not to go for another rate hike. 

However, with prices remaining above the Fed’s threshold, economists anticipate that the apex bank will raise rates by another quarter point during its upcoming meeting later this month.

“Heading into this morning’s report, it was a forgone conclusion the Fed will raise rates later this month by a quarter of a percentage point, while expectations for the September meeting overwhelmingly had interest rates unchanged. Today’s weaker than expected report will likely do little to change interest rate forecasts for this month or September,” 

JJ Kinahan, President of financial network platform TastyTrade, tells CoinChapter. 

Meanwhile, although market watchers and experts see another hike coming, some argue this could be the last one. 

Unemployment drops in latest Bureau of Labor Statistics (BLS) data  

Meanwhile, projections coming from the job market were mainly positive. Contrary to what economists feared, the US did not see the massive layoffs. As many as 209,000 new jobs were created, according to the latest Bureau of Labor Statistics (BLS) data.

Although this is the smallest job increase since December 2020, it marks the 30th consecutive month of job growth. 

As a result, the unemployment rate has dropped to 3.6% while wages increased by 4.4% year-on-year, the report suggests. 

Meanwhile, the cryptocurrency market remained largely unhinged by the report. Prices of major tokens, such as Bitcoin (BTC) and Ethereum (ETH), hovered around the $30, 500 and $1800 mark respectively.