Traders Expecting Fed to Hold Policy Stead
Traders have been anticipating that the Federal Reserve will maintain its current policy at the upcoming meeting in September. The Consumer Price Index (CPI) for July increased by 0.2%, in line with economists’ predictions. On a yearly basis, CPI inflation was at a pace of 3.2%, slightly lower than the expected 3.3%. The core CPI, which excludes volatile food and energy costs, also rose by 0.2% in July. Yearly core CPI was 4.7%, slightly lower than the forecasted 4.8%. Despite these numbers, the price of bitcoin remained relatively unchanged following the release of the report.
Key Points:
- Traders expect the Fed to maintain its current policy at the September meeting.
- The CPI for July increased by 0.2%, in line with economist forecasts.
- CPI inflation on a yearly basis was at a pace of 3.2%.
- Core CPI, excluding food and energy costs, rose by 0.2% in July.
- The price of bitcoin remained stable after the report was released.
The U.S. Federal Reserve implemented a series of monetary tightening measures in 2022 to combat rising inflation. Interest rates were increased by more than 500 basis points over the past 17 months. The recent rate hike took place in June. This tightening has had an impact on the price of bitcoin, which experienced a significant drop from over $69,000 to just above $16,000 by the end of 2022. Inflation has been steadily declining, although there was a slight increase in July. The Fed’s target inflation rate is 2%, but there have been indications that the central bank may end the tightening cycle before reaching that point.
Market expectations suggest that the Federal Reserve will maintain its current policy at the September meeting and potentially for the remainder of 2023. Prior to the release of the CPI numbers, traders had priced in a low 15.5% chance of a rate hike next month.
Hot Take:
The stability of the CPI numbers and the lack of significant movement in bitcoin’s price after the report indicate that traders are not expecting any major changes in the Fed’s policy. This suggests that the central bank’s efforts to combat inflation have been effective so far, and it may continue to take a cautious approach in the coming months.
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