The US consumer price index was just released. The CPI shows a year-on-year change of 8.3% and a month-on-month change of 0.1%. These are not the numbers the crypto market was hoping for. The estimated CPI was expected to be 8.1% year-over-year and -0.1% year-over-year. Bad CPI is not good news for the crypto-currency market.
Following the CPI data, bitcoin and Ethereum prices are down. Both BTC and ETH fell nearly 6 percent in a matter of minutes. The core CPI numbers are also worse than expected. Core CPI shows a 6.3% year-over-year increase, instead of the expected 6.1%.
Why is CPI data important for crypto currencies?
The consumer price index is an important measure of inflation. The Federal Reserve takes this data into account when deciding monetary policy. The Fed is taking an aggressively hawkish stance to reduce inflation levels. Fed Chairman Jerome Powell has promised to hurt households and businesses when the Fed curbs inflation.
Favorable CPI data could have helped moderate the Fed’s stance. However, with worse than expected data, the Fed will most likely continue to take an aggressive stance. The CME Fed Watch tool reveals that the Fed will almost certainly raise interest rates by 75 basis points. High interest rates due to CPI are not good news for the crypto-currency market. A larger than usual interest rate hike in June led to a crypto bloodbath.
More importantly, there will likely be no reprieve for the markets after September. Treasury Secretary Janet Yellen believes inflation prices will rise in the winter due to a gas shortage in Europe. In addition, Cleveland Fed President Loretta Mester revealed that multiple interest rate hikes are likely.
Can the merger save the Crypto?
The Ethereum merger is an extremely bullish event for the crypto. Investors are hoping for a successful merger, as it can help rally the falling price. However, many crypto currency traders are betting against a successful merger.