Higher CPI Inflation Forces Markets To Reprice – Bitcoin Magazine


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Inflation Is Not Over

Despite the overall consensus and sentiment for good inflation news this past month, the higher-than-expected U.S. August Consumer Price Index (CPI) print has derailed any short-term bullish momentum for risk assets that’s been building over the last week. As a result, equities, bitcoin and credit yields exploded with some volatility today. The S&P 500 Index closed down 4.3% with bitcoin following on a 10% plus down move. The last time this occurred for equities was June 2020.

It’s a similar event to what we saw last month for July data, but in reverse and with more magnitude. Markets cheered on a loosely confirming trend of peak inflation last month, only to have today’s data say otherwise. Now we look to the broader market for risk and rates over the next few days to confirm this new rally downtrend or some relief with the Merge expected to take place late tomorrow night.

Both headline CPI and Core CPI beat expectations that had consensus positioning for month-over-month deceleration. Instead, we got both headline CPI and Core CPI rising month-over-month to 0.12% and 0.57% respectively. In simpler terms, inflation has not been vanquished yet and there’s more work to do (or attempt to do) on the monetary policy front. The Cleveland Fed Inflation Nowcast pretty much nailed their August forecast.

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