Crypto market participants are bracing for US CPI inflation data today, with Bitcoin sliding almost 2% to below $77,000 ahead of the release. Recent oil price rebounds amid the US-Iran war are keeping traders uncertain about market direction. Here’s what JPMorgan, Morgan Stanley, Citigroup, and other Wall Street giants’ estimates say.
Wall Street Expectations on US CPI Inflation
The U.S. Bureau of Labor Statistics will release the August US CPI inflation report today, September 11. Economists’ forecasts point to a 0.4% month-over-month (MoM) rise in inflation, up from 0.1% in July, with annual inflation expected to hold steady at 3.4%, similar to July headline CPI inflation data.
Meanwhile, core CPI is projected at 0.2% MoM, similar to 0.2% previously. Core CPI inflation, which excludes food and energy, is expected to have dropped to 2.4%, falling from 2.5% Core CPI inflation print last month.
Notably, JPMorgan, Goldman Sachs, Barclays, Morgan Stanley, Wells Fargo, and other Wall Street giants estimate a 3.4% median CPI inflation forecast. Moody’s and Nomura expect easing to 3.3%. Meanwhile, the August core CPI median estimate is 0.2%, similar to economists’ forecasts.
Goldman Sachs Short Macro Trading’s Brian Bingham says the Fed is now heavily focused on a single upcoming CPI print. He notes Fed Waller’s recent dovish remarks confirmed the FOMC Board skews dovish. Brian Bingham argues that if a Fed rate hike is priced above 50%, bond markets would interpret a Fed hold as a policy error.
Crypto Market in Panic Over Rising Fed Rate Hike Odds
Friday’s August US CPI report is one of the most important inflation prints in months, with the outcome potentially deciding whether the Fed hikes rates at next week’s FOMC meeting. The crypto market is in panic mode over rising uncertainty.
CME FedWatch Tool shows a 69% probability of a 25 bps Fed rate hike in September. Fed rate hike odds have climbed after US PPI inflation came in hot at 5.4%. JPMorgan expects the Fed to deliver its first 25 bps rate hike in December, bringing the policy rate to 3.75-4.0%.
However, oil prices are falling more than 1.50% to near $101 per barrel today, after rising massively amid renewed strikes by the US and Iran.
BIT (formerly Matrixport) predicted a Fed pause could trigger a Q4 rally in the crypto market, with US debt surpassing $40 trillion and Treasury yields near 5%. There are key catalysts for capital rotation into Bitcoin and gold, BIT analyst noted.
Bitcoin price has rallied 22% and gold by 9.4% as the macro regime shifted to early cyclical reflation, where the US dollar weakens and commodity prices rise. US dollar index (DXY) dropped to 99 on Friday and the 10-year Treasury yield held near 4.95%.
The crypto market and Bitcoin are slightly rebounding ahead of CPI inflation data. At press time, BTC price bounced from $76,545 to trade near $77,210. However, trading volume has tumbled more than 11% over the past 24 hours, indicating traders remain cautious.
For traders looking to hedge against interest rate volatility, the best regulated prediction markets in US offer direct trading on Fed rate outcomes and CPI prints.
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