Rising U.S. Inflation Surprises Analysts
The latest data from the U.S. Bureau of Labor Statistics reveals that September’s inflation in the country surpassed expectations. The Consumer Price Index (CPI) rose by 0.4% on a seasonally adjusted basis, following a 0.6% increase in August. The increase in housing costs and gasoline prices were major contributors to this rise.
Market Impact
The news of rising inflation had a negative impact on the markets. All four major U.S. stock indices experienced a decline, and the cryptocurrency market shrank by 1.34%, reaching $1.04 trillion. Bitcoin (BTC) also saw a decrease of 4.4% in just one week, trading below $27K. Additionally, gold and silver prices tumbled after the release of the inflation data, leading to speculations about a potential interest rate hike by the U.S. central bank.
Conflicting Views on Inflation
While some experts predict further inflation, there are skeptics who believe it will decrease. Andrew Hunter, Capital Economics’ deputy chief U.S. economist, expressed his perspective, stating that there is nothing in the data to convince Fed officials to raise rates at the next meeting. He expects a decline in inflation and weaker economic growth to result in more aggressive rate cuts next year.
Probability of Rate Hike
According to the CME Fedwatch Tool, there is an overwhelming 87.4% probability that the Federal Reserve will maintain its current rates at the upcoming meeting in 20 days. There is only a 12.6% chance of a potential 25 basis point increase.
Hot Take: Will Rising Inflation Lead to Rate Hike?
The unexpected rise in U.S. inflation has created uncertainty in the markets. While some anticipate a potential interest rate hike by the Federal Reserve, others believe that inflation will decrease. The upcoming meeting will provide further insights into the Fed’s decision. It remains to be seen whether the central bank will take action to control inflation or maintain its current stance to support economic growth.
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