Cryptocurrency prices held up on Tuesday after a widely watched U.S. inflation measure showed consumer prices were flat in October.
The Consumer Price Index (CPI) rose 3.2 percent in October over a 12-month period, the Bureau of Labor Statistics said Thursday. Economists had expected the index to show an annual increase of 3.3%, down from last month's 3.7% clip.
On a month-over-month basis, the index that tracks price changes was unchanged after a 0.4% jump in September. October's increase in shelter prices was offset by a 5.3 percent drop in gasoline prices, the BLS said.
“Overall, inflation came in softer than expected,” Decislava Aubert, a research analyst at Kaiko, told Decrypt.
According to CoinGecko, Bitcoin and Ethereum were trading at $36,600 and $2,000 respectively. While both coins posted modest gains shortly after the report, Bitcoin was down 0.6% on the previous day, while Ethereum was flat.
Last June, the Federal Reserve raised interest rates sharply in the past year and a half to curb inflation, increasing to a 40-year high of 9.1% last June. Inflation has moderated since then, but remains above the Fed's target of 2 percent each year.
The U.S. central bank decided to keep interest rates on hold this month at a target range of 5.25% to 5.50%, representing the second consecutive rate hike. Fed chairman Jerome Powell said officials were “treading carefully” in terms of risks and noted “how far we've come.”
By raising the benchmark rate, the Fed affects how expensive it is for businesses and consumers to borrow. The U.S. central bank hopes that higher rates will reduce economic demand and that U.S. companies will raise prices faster.
While high interest rates can help keep inflation in check, they can send the economy into a recession if the level of borrowing becomes too much of a drag on economic growth. So far, the labor market and the economy have shown “signs of resilience,” Powell said earlier this month.
Oliver Rust, head of product at free inflation data aggregator Truflation, told Decrypt that he doesn't expect the U.S. central bank to raise rates anytime soon. At the same time, Rust believes that the Fed will stay where they are for a long time. “I expect interest rates to be higher for a longer period of time — a much longer period,” he said, adding that traders shouldn't be. Slow down in the first quarter of next year.
Last month, expectations for a quarter-point hike in December fell from 29% to 15%, according to CME Group's FedWatch tool. As of this writing, traders think the Fed is likely to start cutting rates in June.
Americans may feel that inflation is still rampant. However, prices in the US seem to have cooled compared to Argentina. Inflation reached 143 percent in October on Monday as the country prepares for a presidential election campaign featuring an anti-central bank candidate.
Edited by Stacy Elliott.
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