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US CPI comes below expectation at 7.7%, will this kick-start a recovery rally for cryptos?

  • The US Consumer Price Index decreased to 7.7% on November 10.
  • The ongoing CPI levels are still way too high for the Federal Reserve.
  • Bitcoin price targeting $16,457, rising from $15,900.

The Consumer Price Index (CPI) has been a matter of concern for not just the US stock market but also the crypto market. Although the inflation rate has been reducing month-on-month, it is still far from what the Federal Reserve (Fed) has targeted since March 2021.

This is where inflation stands

The US Bureau of Labor Statistics (BLS) released the CPI for October, with the figure noting a bare difference from September’s 8.2%. Investors were already anticipating the CPI to be at 7.9%, which could potentially lead to another 75bps hike followed by a pivot in Federal Reserve’s stance from hawkish to dovish.

US Consumer Price Index

US Consumer Price Index

Mike Feroli, the Chief US Economist at JP Morgan, in a preview to ZeroHedge, had given out certain targets for the stock market ahead of the CPI release. Feroli adds that if the inflation rate was to hover around 8.1% to 8.3%, the stock markets were expected to decline by 2-3%.

Whereas if the rate stood under 8% or at 7.9%, the stock markets would remain virtually unchanged. Anything below 7.9% would be a matter of celebration, and the stock markets were expected to react positively. Now that the CPI stands at 7.7%, the markets are reacting accordingly.

However, the Federal Reserve is still adamant about bringing the inflation rate down to 2% in the long run. The Fed preferred inflation measure is not the CPI but the Personal Consumption Expedintures (PCE) Price Index, but the US central bank has been targeting this since March 2021, when the rise above 2% first began. Commenting on the same, President of the Federal Reserve Bank of Richmond, Thomas Barkin, said,

“The Fed can’t let inflation fester and expectations rise. If we back off for fear of a downturn, inflation comes back even stronger and requires even more restraint. That’s why the Fed is not waiting around for things to settle on their own time.”

Barkin added that the Fed is willing to do whatever it takes to achieve 2%.

Just this month, the Fed raised the interest rate by 75 basis points (BPS) for the fourth month consecutively, bringing the rate to 3.75% - 4.25%. The Federal Reserve is still maintaining its stance on the interest rate hike, expecting it to reach 4.5% to 4.75%. According to the Fed Chair, Jerome Powell, the interest rates will keep rising as long as inflation stays high.

Bitcoin rises to $16,500

Bitcoin price fell to $15,900 on November 9 following the broader market crash but could be seen hovering at $16,475 on November 10. A recovery towards $17,500 is expected from the king coin, but if the bearish sentiment takes precedence, a decline to $15,000 could be on the cards.

TradingView Chart
BTCUSD 1-day chart

Author

Aaryamann Shrivastava

Aaryamann Shrivastava is a Cryptocurrency journalist and market analyst with over 1,000 articles under his name. Graduated with an Honours in Journalism, he has been part of the crypto industry for more than a year now.

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