Key facts
- August US CPI inflation report due September 11.
- Economists forecast 0.4% MoM rise in headline CPI.
- Annual inflation expected to hold steady at 3.4%.
- Core CPI projected at 0.2% MoM, falling to 2.4% annually.
- JPMorgan, Goldman Sachs, and other Wall Street firms estimate 3.4% median CPI.
- CME FedWatch Tool indicates a 69% probability of a September Fed rate hike.
Crypto market participants are closely watching the upcoming US Consumer Price Index (CPI) inflation data, with Bitcoin experiencing a nearly 2% decline to below $77,000 in anticipation of the release. Uncertainty about market direction persists, partly due to recent oil price rebounds influenced by the US-Iran conflict.
Wall Street institutions have provided their estimates for the August US CPI report, due September 11. Economists generally predict a 0.4% month-over-month increase in headline inflation, up from July's 0.1%, with the annual rate expected to remain around 3.4%. Core CPI, which excludes food and energy, is forecast to rise 0.2% month-over-month, potentially falling to 2.4% year-on-year from 2.5% previously.
Several major financial institutions, including JPMorgan, Goldman Sachs, Barclays, Morgan Stanley, and Wells Fargo, share a median forecast of 3.4% for annual CPI. Moody's and Nomura anticipate a slightly lower figure of 3.3%. The median estimate for core CPI remains at 0.2% month-over-month.
Goldman Sachs' Brian Bingham highlighted the Federal Reserve's intense focus on this CPI print, noting that dovish remarks from Fed Governor Waller suggest a dovish lean within the FOMC. Bingham argued that if bond markets price in a Fed rate hike exceeding 50 basis points, a Fed hold would be seen as a policy error.
The crypto market is reportedly in a state of panic due to rising odds of a Federal Reserve rate hike. The CME FedWatch Tool indicates a 69% probability of a 25 basis point increase at the upcoming FOMC meeting. This sentiment follows a hotter-than-expected US Producer Price Index (PPI) inflation report of 5.4%.
JPMorgan anticipates the Fed's first 25 basis point rate hike to occur in December, bringing the policy rate to 3.75-4.0%. Meanwhile, oil prices have seen a decline of over 1.50%, trading near $101 per barrel, after a significant rise linked to renewed tensions between the US and Iran.
BIT (formerly Matrixport) has suggested that a pause in Fed rate hikes could trigger a fourth-quarter rally in the crypto market, especially with US debt exceeding $40 trillion and Treasury yields near 5%. The firm's analyst pointed to key catalysts for capital rotation into Bitcoin and gold, noting that Bitcoin has rallied 22% and gold 9.4% as the macro environment shifts towards early cyclical reflation, characterized by a weakening US dollar and rising commodity prices. The US dollar index (DXY) fell to 99 on Friday, and the 10-year Treasury yield hovered near 4.95%.
Bitcoin has shown a slight rebound ahead of the CPI data, moving from $76,545 to trade near $77,210. However, trading volume has decreased by over 11% in the past 24 hours, signaling caution among traders. For those looking to hedge against interest rate volatility, regulated prediction markets in the US offer direct trading on Fed rate outcomes and CPI prints.