Inflation Rate Update

The key Fed inflation rate reached 2.1% in September, aligning with expectations and moving closer to the Fed's target. According to a Commerce Department report released on Thursday, inflation saw a slight increase, highlighting its proximity to the Federal Reserve's desired levels.

The personal consumption expenditures price index (PCE) rose by 0.2%, seasonally adjusted for the month, with a 12-month inflation rate of 2.1%, consistent with Dow Jones projections.

The PCE data is essential for the Fed as it acts as their primary inflation gauge, though other measures are also monitored. Fed officials aim to maintain an inflation rate of 2% per year, a target that has not been achieved since February 2021. The headline rate for September decreased by 0.2 percentage points compared to August.

Conversely, the core inflation rate surged to 2.7%, up 0.3% from the previous month. The timing of this data has led markets to heavily speculate that the Fed might reduce its benchmark short-term borrowing rate in their upcoming meeting next week.

Crypto Market Reaction

The release of the key inflation rate coincided with profit-taking in the crypto market after a rally where Bitcoin reached $73,000, marking its highest level since hitting $73,750 in mid-March.

As the market digests the new economic data, cryptocurrencies have generally trended lower, with significant losses across various assets. Bitcoin, Shiba Inu, Pepe, Chainlink, Bonk, and WIF reported losses between 1.7% to 7% over the last 24 hours.

This selling activity has led to a wave of liquidations approximating $136 million, according to CoinGlass data.

Inflation rates have significantly impacted crypto markets, particularly as they influence the Federal Reserve's monetary policy decisions. A lower inflation rate generally signals a more lenient policy stance, generating optimism among crypto investors who perceive this as a catalyst for price increases. Conversely, high inflation rates are unfavorable for risk assets, including cryptocurrencies.

In the upcoming days, market participants will keenly observe any indications from the Fed regarding future policy measures. Currently, policymakers are in a "blackout period" before the November 6-7 meeting, restricting them from commenting on data releases or their overall policy and economic outlook.