May 14, 2022 – Inflation remains high; mortgage rates climb; crypto meltdown

Welcome to the May 14, 2022 issue of Business News Digest by Simple Finance and Economics. The highlights of this issue: The consumer price index increased by 8.3% year-over-year, the average 30-year fixed reached 5.27%, and a popular cryptocurrency lost 99.9% of its value in just one week.

Inflation remains high

According to the latest consumer price index (CPI) release, the price level in April 2022 increased by 8.3% compared to the same month last year. Inflation remains high, although the momentum is not getting stronger.

Some business economists believe that inflation has peaked or will soon peak. This adds some hope that the Fed may not take a more aggressive approach to monetary tightening than what the market has already priced in.

Mortgage rates climb

The average 30-year fixed continued its climb and reached 5.27% in the first week of May 2022, pointing to a year-over-year increase of more than 230 basis points. The same trend is also seen with the 15-year fixed mortgages. The last time mortgage rates were this high was in 2009.

With fixed-rate loan costs at a decade high, adjustable-rate mortgages have become more popular recently as borrowers look to the possibility of lower rates in the future when inflation subsides.

Crypto meltdown

The cryptocurrency LUNA, also known as Terra, lost 99.9% of its value in just one week. Terra’s market cap stood at over $25 billion earlier this year. The stablecoin UST, also known as TerraUSD, which is linked to Terra, lost its so-called one-to-one peg to the dollar and traded below 25 cents at one point on Wednesday, May 11.

As the widespread sell-off in the cryptocurrency market continues, Coinbase, one of the largest crypto exchanges, disclosed in its latest earnings report on Tuesday, May 10, that its revenue fell 27 percent year-over-year. The Coinbase stock is down over 70% compared to its initial public offering price last year.

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