Crypto Markets Brace for Inflation Data Amid Rate Hike Fears
The US Federal Reserve's upcoming decision on interest rates has market participants on edge as they await next week's inflation data. According to Morgan Stanley, the Fed is likely to keep its policy rate unchanged in September.
However, concerns over a potential rate hike have been amplified by the latest nonfarm payroll data, which showed the nation added 162K jobs in August, exceeding Wall Street expectations of 53K. This has raised fears that the economy's resilience could be misinterpreted as inflationary pressures increasing, prompting the Fed to take action.
Morgan Stanley predicts a monthly US CPI increase of 0.23% and core PCE inflation of 0.2%, which would lower annual core inflation to 3.1%. The bank's expectations have offered some relief to market participants, but the stronger-than-anticipated jobs data has dampened sentiment.
The crypto market has retreated in response to the cautious stance of investors, with Bitcoin leading the decline. If the inflation data exceeds market expectations, it could wipe out recent gains in the crypto market and increase bets on a potential 25 bps Fed rate hike in September.