US July Consumer Price Index Rose Slightly Faster Than Expected

A year-over-year gain of 5.4% may reflect an economy that’s still suffering from supply shortages while keeping up with increasing demand.

Aug 11, 2021 at 12:41 p.m. UTC
Updated Sep 14, 2021 at 1:38 p.m. UTC

The U.S. Consumer Price Index jumped by 5.4% in the 12 months through July, the same pace as June but slightly exceeding the 5.3% increase expected by economists, the Labor Department reported Wednesday.

Core CPI, which excludes food and energy prices, rose 4.3% year-over-year, lower than economists’ expectation of 4.4%.  

Prices rising while interest rates remain low could lead more investors to pour into bitcoin over bonds as a reward for paying those higher prices. Bitcoin traders closely track headline inflation numbers in the event that the premiere digital asset becomes a hedge against inflation because of its limited supply cap.

The Labor Department's Bureau of Labor Statistics reported the increase, which compares July 2021 prices to those from July 2020 and shows an economy that’s working through supply constraints while trying to meet increasing demand. On a month-to-month basis, which takes out how much prices dipped in 2020, consumer prices rose 0.5% 

The July CPI report may not influence tapering discussions at the Federal Reserve. In last month’s Federal Market Open Committee (FOMC) press conference, Fed Chair Jerome Powell noted that the central bank is aiming to make gains in its goal to reach maximum employment before tapering. (The Fed’s quantitative easing program brings more liquidity to the markets through quantitative easing that gives investors the liquidity to invest more in riskier assets like bitcoin.)

The rest of the report was illustrative of easing bottlenecks in the global supply chain. On a month-over-month basis: 

  • Used vehicle prices rose by 0.2%, slowing June’s trend of high demand for used automobiles in lieu of new ones, when prices for used autos increased by 10.5%.
  • Airline fares fell slightly by 0.1%, compared to June’s 2.7%.
  • The food index increased by 0.7%, compared to June’s 0.8%.
  • The energy index increased by 1.6% with the gasoline index rising by 2.4%.
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