The Consumer Price Index (CPI) in the U.S. rose by 0.2% in September, exceeding the expectations set by economists. Additionally, the core CPI, which excludes food and energy costs, also saw a growth of 0.3%, higher than the anticipated 0.2%. These numbers suggest that the Federal Reserve may not cut rates by 50 basis points in November, and there is a possibility that they might not adjust rates at all.
Following the release of the CPI report, the price of bitcoin experienced a slight decline. The inflation rate in September was higher than expected, with the CPI rising by 2.4% on a year-over-year basis, compared to the forecasted 2.3%. Similarly, the core CPI increased by 3.3% year-over-year, surpassing the expected 3.2%.
The Federal Reserve surprised many by initiating a rate-cutting cycle in September with a 50 basis point cut instead of the anticipated 25 basis points. This led to a surge in crypto prices as investors speculated on further rate cuts at the upcoming policy meeting in November. However, due to recent hawkish comments from Fed Chair Jay Powell and stronger employment data, expectations for significant rate cuts have diminished.
The probability of a 50 basis point rate cut in November has dropped to zero according to CME FedWatch, with a 26% chance that the Fed may not cut rates at all. The latest inflation data further supports the idea that the Fed may hold off on rate adjustments, although weak employment figures, possibly influenced by the aftermath of Hurricane Helene, could counterbalance this.
It is essential to monitor both inflation and employment data closely to gauge the Federal Reserve’s future actions regarding interest rates. The unexpected increase in CPI and core CPI numbers in September has added to the uncertainty surrounding the Fed’s decision in November. Investors and analysts will be observing upcoming economic indicators to better comprehend the direction of monetary policy in the U.S.