CPI and Fed meeting what this means for crypto?

The Consumer Price Index (CPI) measures the average change over time in the prices paid by urban consumers for a market basket of consumer goods and services(it basically measures inflation).

This number is very important for investors in financial assets like crypto, stocks, or real states because it can be used to project the potential Fed(Federal Reserve) actions on the interest rates.

The CPI for August got published on Tuesday the 13th of September, it increased by 0.1 percent, seasonally adjusted, and rose 8.3 percent over the last 12 months, not seasonally adjusted.

But the expected CPI for August was 8.1%.

So markets didn't react well to news of higher inflation and the stock market had its worst day since the announcement of the Covid-19 lockdowns in 2020.

1.5 Trillion Dollars got whipped out of the US stock market in one day.

How did this affect Crypto?

Obviously, this had an impact on Crypto with Bitcoin going down 10% and Ethereum despite the merge coming in the next couple of hours going down 8.2%. And major altcoins seeing a sharp drop in prices as well.

We can see the sharp fall in the total crypto market cap that followed the CPI number announcement on the 13th of September. Around $60 billion got wiped in a couple of hours.

Since the start of the Bear market in October of last year, we can really see How Bitcoin and other cryptocurrencies are following closely the price of tech stocks in the US stock market. So it makes sense for us to monitor the stock market closely and to an extent the general macroeconomics actuality, in which we find monetary policies and geopolitical events.

FED meeting next week what to expect?

We are witnessing a major withdrawal of liquidity (money) from the Markets because investors and traders are anticipating more hawkish behavior from the FED.

Actually, investors started pricing in a 30% to 48% possibility of a FED 100 basis point rate hike which in normal terms means a 1% increase in interest rates. This is huge considering usually the FED only raises interest rates between 25 (0.25%) and 50 (0.5%) Basis points.

There is nothing sure yet about what the FED is going to announce next week but we can say that it finds itself in a very tight position where its decision could potentially deal collateral damage to unemployment, the financial markets, the real state market, inflation, and even public debt.

The global surge in energy prices didn't help the FED at all in its fight with inflation. After what we saw on Tuesday they know that it will be hard to address raising rates without serious implications on the markets especially stocks, bonds, and even sovereign debts of foreign countries. So they might be some political pressure on the FED by hedge funds, and big investors or politicians especially before the midterms not to tighten up as expected.

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