As the world anticipates the release of the U.S. Consumer Price Index (CPI), expectations suggest a jump of 0.6% in August, which would stand as triple the pace of July’s 0.2% increase. Regarded on a year-to-year basis, CPI is forecasted to spiral at a rate of 3.6% against a former 3.2% witnessed in July – a noticeable bump in the growth chart. Behind the surge in inflation, fingers are pointed towards the rejuvenating oil prices with WTI Crude Oil clinching nearly $89 per barrel, a commendable 33% leap since July’s commencement.
The core CPI, known for excluding food and energy prices, and frequently eyed by policymakers at the U.S. Federal Reserve, is presumably set to slide to a 4.3% year-to-year rhythm in August from July’s 4.7% poster. The diminished rate signals the slowest core CPI inflation since mid-2021. On the contrary to the inflation trend, bitcoin (BTC) and the broader cryptocurrency market have lost their summer rally flames with BTC, stooping beneath $25,000, its weakest stature since mid-June, and Ether (ETH) plummeting to six-month lows.
While analysts grapple in pinpointing the exact reasons behind the spiralling cryptocurrency market, persistently elevated interest rates certainly feature high on the list of suspects. Hopes for the U.S. Federal Reserve’s benchmark fed funds extraction had lacked color, gradually fading with the persistent strength of the economy and inflation. At one point, speculations were ripe that the first Fed rate cuts might happen towards the end of 2023; however, the forecast soon moved to early 2024. Presently, the fed funds futures traded at the CME suggest that the first potential cut could be pushed nearly a year away.
While policymakers might greet an impending dip in the core CPI with open arms, an anticipated 4.3% inflation rate dwarfing the Fed’s target 2% is of concern. Central bankers may face a hurdle in declaring their triumph over inflation amid surging prices noted by consumers at the pump. Thus, it presents appealing food for thought to crypto enthusiasts and economic policymakers alike regarding the future of inflation and its relationship with the tumultuous cryptocurrency market.
Source: Coindesk
