A recent report by the U.S. Department of Labor shows that the Consumer Price Index (CPI) rose by 0.2% in July, matching market expectations; however, the details behind these numbers indicate rising inflation under the surface.
Key CPI Data for July
The Consumer Price Index in the U.S. increased by 0.2% in July, while the year-over-year inflation remains at 2.7%. However, the core CPI, which excludes food and energy costs, rose by 0.3% month-over-month and 3.1% year-over-year, indicating persistent inflation.
Digging Deeper: Cause-and-Effect Relationships
Despite energy prices falling by 1.1% in July, other costs remain high. Specifically, medical and transportation services increased by 0.8%, while shelter inflation, which accounts for over a third of the total index, climbed by another 0.2%. These numbers raise questions for the Federal Reserve regarding potential rate cuts.
Impact on Market and Risk Assets
In this economic context, risk assets like Bitcoin did not show an increase despite some optimism in the stock market. Historically, cryptocurrencies thrive when the Fed shifts to easing, but the current situation of persistent core inflation may limit this dynamic.
The consumer price index data shows that while headlines convey calm, the internal structure reveals rising inflationary pressures, complicating the Fed's future decisions regarding interest rate changes.
