CPI Inflation Report Looms Large Over Crypto Market, Fed Rate Hike Odds Surge
The US Bureau of Labor Statistics is set to release its August CPI inflation report on September 11, and market participants are bracing for the outcome. Economists' forecasts point to a 0.4% month-over-month rise in inflation, up from 0.1% in July, with annual inflation expected to hold steady at 3.4%. Meanwhile, core CPI is projected at 0.2% MoM, similar to previously.
JPMorgan and other Wall Street giants estimate a 3.4% median CPI inflation forecast, while Moody's and Nomura expect easing to 3.3%. Goldman Sachs Short Macro Trading's Brian Bingham notes that the Fed is now heavily focused on a single upcoming CPI print, with the FOMC Board skews dovish.
The crypto market is in panic mode over rising uncertainty, with CME FedWatch Tool showing a 69% probability of a 25 bps Fed rate hike in September. JPMorgan expects the Fed to deliver its first 25 bps rate hike in December, bringing the policy rate to 3.75-4.0%. BIT analyst predicts that a Fed pause could trigger a Q4 rally in the crypto market.
Bitcoin price has rallied 22% and gold by 9.4% as the macro regime shifted to early cyclical reflation, where the US dollar weakens and commodity prices rise. The crypto market and Bitcoin are slightly rebounding ahead of CPI inflation data, with BTC price bouncing from $76,545 to trade near $77,210.