US Consumer Prices Rise Faster Than Expected in May

Core CPI, which excludes food and energy prices, came in at 3.8% year-over-year, also higher than economists’ expectations of 3.5%. 

The inflation figures, reported Thursday by the U.S. Labor Department’s Bureau of Labor Statistics (BLS), shows an economy that’s working through supply constraints while trying to meet increasing demand as the country reopens, with business lockdowns ending and coronavirus vaccines reaching more people.

On a month-to-month basis, consumer prices rose 0.6% after increasing 0.8% in April, according to the report. Excluding food and energy, the index rose 0.7% on the month.

“Our U.S. economists are of the view (shared by the Fed’s leadership) that this current episode is likely to prove temporary thanks to one-off factors such as those associated with the economic reopening and base effects,” Deutsche Bank wrote in a newsletter published on Thursday.

Deutsche Bank, however, also published a report on Monday issuing a stark warning that inflation could send the global economy into a recession as central banks lose control. The report was part of a research series highlighting risks to the firm’s house view.

The CPI report is particularly important for some cryptocurrency investors who view bitcoin (BTC) as a hedge against inflation and currency debasement. 

Since most of 2020 saw inflation around 1%, the Federal Reserve has yet to meet its target of seeing 2% inflation on average on an annual basis before raising rates. 

• The index for used cars and trucks continued to rise sharply, increasing 7.3% in May, which accounted for one-third of the seasonally adjusted all items increase, according to the BLS.
• Prices for food, gasoline, household furnishing and airline fares were all up during the past month as the economy reopens.
• One soft spot was the medical care price index, which declined 0.1% in May after rising in each of the previous four months.