US Inflation Data Comes In Cool At 3.2%

Inflation is coming down, but remains above the 2% target set by the Federal Reserve.

The expectation was for a fall in the headline rate to 3.3%

The latest inflation figures are in for the US. CPI for October landed at 3.2% (0% month-on-month), with the important core inflation measure coming in at 4.0% (0.2% month-on-month).

Beating Expectations

The figures are broadly in line with expectations, but slightly better than expected.

Headline CPI was expected to be 0.1% month-on-month for October, already significantly lower that the September figure of 0.4%. Year-on-year, the forecast was for a fall from 3.7% to 3.3%.

Core CPI, which strips out more volatile elements such as food and energy, was forecast to remain steady at 4.1% YoY and 0.3% MoM.

Keenly Watched

As ever, the CPI data was closely watched by traders, since lower inflation reduces the need for further interest rate hikes. Conversely, a miss to the upside would have strengthened the case for further rises by the Fed.

Higher interest rates make risk assets like stocks and bitcoin less attractive to traders, since they can earn more money simply by parking funds in money markets or similar instruments. The aggressive tightening of monetary policy over the past 18 months has therefore been a headwind to crypto, contributing to the bear market through 2022.

The Fed is taking a cautious, data-driven approach, with the aim of bringing inflation back to its 2% target without crashing the economy. Fed Chair Jay Powell recently warned once again that the job might not be complete, and that further rate rises are not out of the question.

One of the factors helping to bring down CPI is the fall in oil prices. Despite a number of reasons to expect a rise, including the war in Gaza, oil has dropped back to around the $80 mark.

Bitcoin reacted positively to the update. Having almost touched $38,000 last Thurday and closed the week at $37,000, BTC has drifted lower and was trading around $36,300. The cool CPI data gave it a $300 bump, though it typically takes several hours for traders to digest and act upon these updates.

BTC 5-minute chart, TradingView
Bitcoin was lifted by the CPI print.

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