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U.S. consumer prices jumped to 13 years high in May

U.S. consumer prices skyrocketed to the highest level in almost 13 years in May, year-on-year, as increasing demand, the ‘base effect’ from last year’s lockdown, and supply chain bottlenecks pushed inflation higher. Energy, flights, used cars, and clothes boosted CPI by 5.0%, higher than analysts expected.

At the same time, core inflation soared, jumping by 3.8% for the first time since 1992. Despite that, bond yields remained calm, and stocks rallied, as investors remained confident that the surge would be temporary.

As the U.S. economy recovers, the number of Americans filing new unemployment claims dropped to a new pandemic low. Last week, only 376,000 initial claims were submitted, as companies held onto staff while trying to fill vacancies.

So far, the European Central Bank’s bond-buying program continues. ECB promised to keep running it at a faster pace than early this year, though. Besides, the bank has also lifted its growth and inflation forecasts, stating that the economic outlook had improved.

Meanwhile, the world’s top banking regulators have called for cryptocurrencies to face the toughest capital regulations. That means banks would need to hold enough capital to cover losing all their money.

According to the Basel Committee on Banking Supervision, digital assets have raised many concerns, from financial stability and consumer protection to money laundering and terrorist financing. This report was the reaction to the knowledge that JBS, the world’s biggest meat processor, has paid an $11m ransom after a cyber-attack shut down its operations, including abattoirs in the United States, Canada, and Australia.

How is inflation influencing businesses? 

In the U.S., the price of lumber has dropped more than 40% since its peak in May. Other commodities have also followed suit, suggesting that some of the price surges that have worried lawmakers and investors this spring may indeed fade with time as the economy rebounds.

Surging demand for lumber due to a pandemic-induced home renovation boom, along with supply constraints caused by production delays, helped contribute to a substantial jump in prices. However, the market is returning to normal already, and the prices are declining again. As a result, analysts hope that inflation will also return to the average level.

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