In a report on July 13, the US economy recorded 9.1% inflation in June, accelerating from 8.6% in May to the highest level in over 40 years. Other indexes such as core CPI (CPI for all items less food and energy) also exceeded the expectation of economists.
The US economy is showing clear signs of slowing down and is at risk of falling into a recession. Meanwhile, commodity prices continue to escalate due to the Russia-Ukraine war and China’s COVID-19 lockdown, which disrupted the global supply-chain. Also, the fact that the US has increased the supply of USD in the period of 2019-2021 to cope with the COVID epidemic is also an important cause for high inflation rate. It is reported that 50% of the current supply of USD has been printed by the US government in the last 2 years.
The US Federal Reserve (Fed) is likely to keep rising interest rates to prevent higher inflation. Fed Chairman Jerome Powell wants to raise interest rates by the end of 2022 to 3.4%, meaning another 1.75% increase in the July, September, November and December adjustments. The current interest rate in the US is 1.75% after 3 consecutive increases in March, May and June.
The high inflation rate has negatively affected both the traditional financial markets and the crypto market. US stock markets continued their sharp decline on July 13.The two largest cryptocurrencies in the market, Bitcoin (BTC) and Ethereum (ETH), also dropped sharply. BTC dropped from $20,100 to $18,910 while ETH fell from $1,100 to $1,006.
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