US inflation higher than expected: markets react with shock
US inflation rises to 3.7 percent. The likelihood of an interest rate hike increases sharply, while Bitcoin and stocks fall.
Inflation in the United States rose faster than expected in September. The disappointing figures cause unrest in the financial markets on Wednesday. The likelihood of a new interest rate hike by the US central bank (Fed) has suddenly increased sharply. Meanwhile, stocks, gold, silver and Bitcoin are falling.
US consumer prices rose 0.6 percent in September compared to August, the Bureau of Labor Statistics (BLS) announced on Wednesday. On an annual basis, inflation was 3.7 percent, while economists expected 3.6 percent.
Core inflation, which does not take into account the strongly fluctuating food and energy prices, was also higher than expected. It increased by 0.3 percent on a monthly basis, compared to an expected 0.2 percent. On an annual basis, core inflation was 2.6 percent, while 2.5 percent was predicted.
Rising energy prices in particular are responsible for higher inflation. Energy prices rose by 5.2 percent in September, while petrol prices even rose by 9.1 percent. The latter explains about half of the monthly inflation increase.
The figures immediately cause unrest in the financial markets. According to data from LSEG, the probability of an interest rate hike by the Fed in October increased from 20 to 45 percent.
US bond yields also shot up. Interest rates on two-year government bonds rose to around 4.93 percent. The ten-year interest rate rose to above 5.3 percent.
At the same time, the US dollar strengthened. The price of silver fell by almost three percent, while gold was also hit hard. The gold price dropped from about $4,153 to a low of $4,093 per troy ounce, a loss of about 1.4 percent. This was followed by a slight recovery towards $4,103.
US equity markets are also under pressure. Forward contracts on the S&P 500 fell 0.2 percent, while those on the Nasdaq 100 lost about 0.5 percent.
Bitcoin (BTC) did not escape the selling pressure either. The Bitcoin price fell from about 83,800 dollars to 82,750 dollars shortly after the publication, a drop of more than one percent.
Higher inflation makes it more difficult for the Fed to lower interest rates. The central bank is aiming for inflation of two percent, but the price increases are still well above that.