Wednesday's U.S. CPI release is important, but so are wider inflation metrics that point to a rebound in price pressures.
Scope for a pick up in inflation rate means the Fed is likely to stay hawkish for sometime. That could bring downside volatility in risk assets, including cryptocurrencies.for July, some observers focus on forward-looking metrics that suggest potential for a rebound in inflation in months ahead, a scenario that could bring some pain to risk assets.
On Thursday at 12:30 UTC , the U.S. Labor Department will release the July consumer price index . Economists surveyed by The Wall Street Journal that the CPI rose 0.2% month-on-month in July, matching June's pace to signal a continued easing of the inflation rate. The annualized rate is forecasted to inch higher to 3.3%, predominantly due to base effects, per WSJ. The core inflation rate is also forecast to hold steady at 0.2% in July from June and 4.8% from a year earlier.
A monthly gain of 0.2% would be consistent with the moderation of inflation that Fed officials want to see, more so given the policy is now– at 5.25%, the Federal Reserve's benchmark borrowing cost is above CPI, core CPI and the bank's preferred inflation measure, the core PCE. So, traders may feel encouraged to scale up exposure to risk assets, including bitcoin, should the data match estimates, validating the strengthening dovish expectations in the market. The Fed funds futures show traders believe the Fed's rate hike cycle peaked in July and the central bank would cut rates next year.ahead, Noelle Acheson, author of Crypto is Macro Now newsletter, explained during CoinDesk's Twitter spaces event on Wednesday.