Bitcoin failed to hold $22,000 as declines in energy prices drove down U.S. CPI less than expected to 8.3% in August; all other sectors rose MoM.

  • Inflation fell to 8.3%, marking the second consecutive month of falling CPI reports.
  • Every sector witnessed increased MoM inflation, except the energy sector which tilted the report.
  • Bitcoin plunged below the $22,000 support level following the CPI release, along with stocks and gold; the dollar edged higher.

Inflation fell to 8.3% from a year-over-year (YoY) perspective marking the second consecutive month of a declining Consumer Price Index (CPI) report. Following the inflation numbers release, bitcoin dropped below $22,000 –– a level it had managed to sustain for the past few days.

August’s CPI reading came higher than expected as almost every single metric used to track the metric rose MoM, except the energy sector. As a result, the Fed is expected to keep tightening further, as a 75-basis point hike in September is now fully priced in and the odds for a 100bps raise have increased. While the scenario poses a challenge to assets such as bitcoin and stocks, the dollar is set to get stronger.

While inflation appears to be slowing down, the YoY numbers for many sectors still remains exceptionally high and month-over-month (MoM) inflation still remains an issue.

This month’s slightly lower CPI report is almost entirely due to declining energy prices. Energy commodities and gasoline both lowered about 10% with fuel oil dropping almost 6% MoM. The only other sector to go down in August was used cars and trucks, which fell 0.01%.

The highest sectors experiencing high levels of YoY inflation include fuel oil (66%), utility gas services (33%) and energy commodities (27%), with the entire energy sector having inflated by nearly 24%.

Looking at MoM, utility piped services rose 3.5% in August with the sector of energy services still rising 2.1%.

Therefore, while inflation seems to be slowing down in the broader sense, there are still plenty of economic concerns the Federal Reserve will need to contend with as it further offloads its balance sheet and drives up interest rates.


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