Key Takeaways
- U.S. inflation declined from 8.3% to 8.2% on a yearly basis in September.
- Although the Consumer Price Index fell by 10 basis points, the decline was less than economists’ expectations.
- As inflation is still high and the economy is in crisis mode, the Fed is likely to continue hiking interest rates, which suggests crypto will continue to suffer.
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Inflation has now cooled for three consecutive months.
U.S. Inflation Hits 8.2%
U.S. inflation keeps falling—but it’s still running hotter than the Federal Reserve would like.
The Bureau of Labor Statistics dropped the latest Consumer Price Index report Thursday, showing that inflation cooled by 10 basis points in September.
The price of goods rose by 8.2% on a yearly basis last month, falling higher than economists’ broad expectation of an 8.1% reading. On a monthly basis, the CPI rose by 0.4%.
Despite coming in higher than expected, today’s print is the third consecutive monthly decline in U.S. inflation, following a 40-year record high reading of 9.1% in June 2022.
Although the latest few CPI prints have indicated that inflation may have peaked, markets reacted negatively to today’s reading. Major U.S. stock indices like the Dow Jones and Nasdaq 100 plummeted in pre-market trading, while the crypto market also saw a sharp decline. Bitcoin is down over 4%, while the second largest cryptocurrency, Ethereum, sold off more than 6%.
Despite hopes that inflation would quickly retreat toward the Fed’s 2% target, the 8.2% reading shows it’s “sticky”—and therefore could remain high for longer than expected. High inflation and slow economic growth are bad news for risk assets like crypto and the broader financial markets.
Watching the Fed
Traders have been watching inflation closely this year as the numbers have a key bearing on the Federal Reserve’s moves. As inflation has soared, the U.S. central bank has responded with an aggressive economic tightening policy, hiking interest rates to 3% to 3.25%, levels not seen since the Global Financial Crisis in 2008.
Interest rate hikes are relevant to traders and investors as they tend to have an impact on risk assets due to the rising cost of borrowing money. The Fed’s hawkish stance is arguably the biggest factor behind crypto’s staggering $2 trillion washout since November 2021.
The U.S. central bank is the world’s most powerful force on global markets, and the recent economic crisis has led…
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