Replays · US CPI · 13 Jul 2022, 13:30 UK

The peak of US inflation, and the bottom of the reaction

This was the highest US inflation reading in more than forty years. According to the BLS, prices rose 9.1% over the year to June, the largest 12-month increase since November 1981. Bitcoin, which had already fallen below $20,000 that summer, dropped 3.3% in five minutes.

Annual CPI inflation by reference month, first prints (ALFRED). The June figure was published on this day.

The figures

Headline prices rose 1.3% in June alone, after 1.0% in May. The BLS said energy rose 7.5% in the month and accounted for nearly half of the increase, with gasoline up 11.2%. Core prices rose 0.7%. Every part of the report was above where markets wanted it to be.

The hour

1 13:30 UK: the June CPI report
2 14:30 UK: Bitcoin about 5.7% below the release price, near $18,900

Bitcoin, five-minute candles from 30 minutes before to four hours after. % from the 13:30 UK price of $20,040. Source: Bitstamp.

Bitcoin's first move was the biggest. It then drifted lower for the rest of the hour and touched about $18,900 at 14:30 UK. The hour closed -5.2% lower, 11.1 times a normal hour, which ranks #4 of 117 CPI releases in our data. Ether fell more, 7.1%.

US stocks surprised. Instead of falling, the Nasdaq 100 ETF rose 1.0% in the hour and 2.3% in four. Crypto followed only slowly: Bitcoin was still 3.4% down at four hours.

It is worth noting how the market had been positioned. Bitcoin had fallen below $20,000 in June, after the collapse of Terra and the failure of several crypto lenders, so a lot of bad news was already in the price. That may be why the drop, though sharp, didn't turn into a wider crash. Within four hours every coin in our data had recovered part of its loss.

The pound barely moved at the fix, +0.12%, much smaller than the moves in crypto.

The week: Ether's Merge rally

Change over the week after the release.

The next day, 14 July, Ethereum developer Tim Beiko proposed 19 September as a tentative date for the Merge, Ethereum's switch to proof of stake. Ether rallied hard and ended the week 46% above its price at the CPI release. Bitcoin was 18% higher. The CPI drop was quickly forgotten, and in hindsight June 2022 turned out to be the peak of annual US inflation in that cycle.

Sources: release time and figures from the U.S. Bureau of Labor Statistics (public domain), first-print values via ALFRED, Federal Reserve Bank of St. Louis. Crypto: Bitstamp 5-minute candles; SPY/QQQ: IEX. No consensus forecasts are shown because they are proprietary; comparisons are with the previous release. “× normal hour” compares the first-hour move with the median move in matched quiet hours. How we measure it.