US inflation increase likelihood of higher interest rates – what does this mean for Bitcoin?

Bitcoin, fortunately for most of us, remains above $60,000 just as new US economic figures are emerging that could change the whole picture. Inflation in the United States rose very sharply again last month, reaching as high as 4.2 percent year-on-year, compared to 3.8 percent in April.

Inflation

That is just about the highest level in nearly three years. That is bad news for Bitcoin and even worse news for President Donald Trump, as it greatly increases the likelihood of higher interest rates in the future.

The higher US inflation is mainly due to rising gasoline prices. That, in turn, is a direct consequence of the war in the Middle East. While the average price for a gallon (approximately 3.7 liters) of gasoline was still $2.98 in February, it is now around $4.15.

According to the inflation report, energy accounted for more than sixty percent of the total monthly increase in inflation. Food and housing also became more expensive, but at a much slower pace.

Economists fear that inflation above 4% will also creep into the European economy in the coming months.

This news therefore increases the likelihood of an interest rate hike by the Federal Reserve, which in turn is bad news for tech stocks, Bitcoin, and even gold (which has been trading at an 11-week low).