How are the markets reacting to inflation? The situation is not improving. Inflation in the United States persists and the markets surely did not expect it to continue. According to analysts, even the FED does not know where to turn and remains perplexed as to what will happen in the coming months.
Is inflation slowing down?
The US economic figures which have just been published confirm a slight drop in inflation. This is compared to last month. It is 8.2%, which is about a tenth of the expected percentage.
The report will be submitted to the Federal Reserve (the Fed ) and will serve as the basis for its future policy development. This will also allow him to establish the interest rates to be put in place. In sum, inflation is falling, but not fast enough as everyone would have liked. The risk is that this will trigger further central bank interest rate hikes in the coming weeks.
According to the Producer Price Index (PPI) data released yesterday, the PPI inflation rate was 8.5% in September. This represents 0.4% more than the figures for August. Remember that these figures follow two months of fairly notable declines.
The inflationary deceleration has begun.
For Gabriel Santos, of JPMorgan Asset Management, the deceleration of inflation has begun. This is despite the fact that the news is not yet what we expected. As far as IPP data is concerned, problems at the level of the supply chain are gradually being solved. There has also been a marked improvement in the price of energy and basic products in general.
However, these are only partial improvements. According to him, there is nothing to stress about since we are at the beginning of a change. The PPI figures already give us some clues about what could happen in the coming weeks.
Nevertheless, many fear the CPI. For her part, Stephanie Link, chief investment strategist for Hightower, believes that the US economy is still at high levels of inflation. This, despite the small improvements, is noted here and there.
The impact on the cryptocurrency market
US inflation has a direct impact on the cryptocurrency market. Last Thursday, Bitcoin (BTC) fell below $19,000. For its part, Ethereum (ETH) fell below $1,300. The decline in prices was noted after inflation went to its highest level. Recall that headline inflation rose by 0.4% month-on-month and 8.2% year-on-year.
Core inflation, meanwhile, reached 6.6%. Analysts say inflation is at its highest level since 1982.
The impacts of inflation are felt on both the stock market and the crypto market. S&P 500 futures, for example, fell 1.88% before the market opened. For their part, futures on the Nasdaq 100 fell almost 2.89%. Over the past 24 hours, altcoins have also recorded significant declines. For example, the ADA fell by 7.4% while the SOL tumbled by nearly 8.5%.
Further interest rate hikes?
We must be prepared for the possibility of a further increase in the Fed's interest rate. If we rely on the CPI data, we come to the conclusion that it is significantly higher than expected. This reinforces the idea that the Fed's 75 bps interest rate hike in November will indeed be effective.
Matt Well, global head of market research at Forex.com, agrees. According to him, the CME's FedWatch tool shows that the probability of a further interest rate hike of 75 or even 100 points is validated by more than 90% of traders and operators. In any case, we can only remain optimistic about the changes to come and patiently await the measures that the FED will take.
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