Bitcoin jumps 6% amid the fastest rise in consumer prices since the financial crisis

The US Bureau of Labor and Statistics today rekindled inflation fears by reporting a 5% increase in the consumer price index since last year. This is the fastest year-on-year increase since the housing bubble burst in 2008, when the index rose 5.3%. Often heralded as a hedge against inflation, Bitcoin is up 6.6% in the last 24 hours. The consumer price index (CPI) is a basket of consumer goods used to measure the overall cost of living of individuals. Items range from the cost of milk, cereal and bacon to used cars, sporting goods and housing. Economists use changes in the CPI as a measure of whether an economy is experiencing inflation or deflation. The 5% increase in the average change in cost out of a total of 80,000 items included in the index indicates that many consumer goods have become more expensive. A notable category among these items was used car and flight ticket prices, with 7.3% and 7%, respectively. Bitcoin: hedge against inflation or not? These numbers are much higher than expected. Two forces are driving these increases: consumer spending exceeding supply and a record-breaking period of fiscal stimulus. The pandemic has put many supply chains under pressure last year, putting pressure on demand for various materials such as wood. The side effects of the pandemic are still lingering and this may be the main reason behind Thursday's unusual CPI report. “The supply shortage is affecting multiple industries,” Alexandre Lores, an analyst at Quantum Economics, told Decrypt. “Microchips are a serious example. Ketchup packets are different. These last two points can create big waves.” As for the latest fiscal policy, Lores said the stimulus isn't "always bad". But over time he "can irresponsibly ignore the fundamental laws of the economy, and that will always result in a crash." The S&P 500, the stock index of the top 500 US companies, rose 0.21% after the report and is now trading at an all-time high. The views and opinions of the author are for informational purposes only.

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