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The crypto market is seeing a major price movement. The US Bureau Of Labor Statistics has released the Consumer Price Index for the month of September.
The inflation data is worse-than-expected and shows the inflation level is hotter than expected. The Producer Price Index also highlighted a bad picture of inflation in the economy. Experts are expecting further downslides in the crypto market as the Fed is extremely likely to take another step toward restrictive monetary policy.
What Does CPI Mean
The Consumer Price Index measures the change in the price of a basket of goods and services on a Month-on-Month and Year-on-Year basis. It is an important measurement of the inflation levels of the country. The US Federal Reserve takes into account the CPI to make monetary policy decisions.
The Fed’s stance on policy guidance is dictated by consumer prices. Central banks are currently engaging in hawkish measures such as interest rate hikes and offloading their balance sheets. As a result, the stock market is in a major sell-off. The crypto market, which is strongly correlated to the stock market, is also undergoing a rough period.
The Fed has already increased interest rates by four consecutive 75 bps mega hikes. The CME Fed Watch Tool shows the extreme likelihood of a fifth 75 bps hike. Last month, a worse-than-expected CPI resulted in the market pricing in a 100 bps hike. It is very possible that the crypto market sees a similar reaction if the CPI is worse than the forecasts.
Inflation Forecast From Major Corporations
Major corporations manage expectations by releasing their CPI predictions. Goldman Sachs has a slightly higher than the consensus forecast for CPI. The firm expects a 0.41% in core CPI, which is in line with the consensus. However, in the headline CPI, they expect a 0.26% increase which is above the consensus.
Similarly, the Cleveland Fed has a higher than the consensus expectation of the inflation data. Cleveland expects a YoY increase in core CPI of 6.64%.
In most of the previous months., the actual data was higher than the consensus expectation. If it holds true, the crypto market can see a bloodbath. However, if CPI is less-than-expected, a strong crypto rally can be expected.
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