While the announcement that the US and Chinese leaders will meet on October 30 has somewhat alleviated trade-related market concerns, investors in global markets are now focused on today's US Consumer Price Index (CPI) data.
The continued government shutdown in the US restricts access to critical data released by public institutions and makes it difficult to formulate predictions regarding the steps the Fed will take regarding interest rates.
At this point, the CPI data in question is expected to provide more clues regarding the Fed's meeting next week.
CPI Expectations
US September CPI data is expected to be released today at 3:30 PM Turkish time. The data was delayed due to the ongoing government shutdown, which has entered its 24th day.
The CPI is the most important indicator for the Fed's interest rate decision, with economists predicting a 0.4% monthly increase and 3.1% annual inflation. This means the CPI, a critical threshold for both traditional and cryptocurrency markets, will surpass 3% for the first time in 2025.
Impact on Cryptocurrency
CPI data is closely followed by cryptocurrency investors as well as global markets.
At this point, economists predict that the CPI data could lead to significant volatility in cryptocurrencies. A lower CPI could trigger rallies in Bitcoin (BTC), Ethereum (ETH), and other cryptocurrencies, while higher inflation could trigger a short-term sell-off.
“Investors should keep a close eye on this CPI figure. It could shape everything from interest rate expectations to riskier assets like stocks and cryptocurrencies,” said crypto analyst Ash Crypto.
Ash Crypto also outlined the possible CPI scenarios that could influence the short-term direction of the crypto market.
Scenario 1: Bitcoin and Ethereum Fall if CPI Comes Above 3.1%
If the CPI comes above 3.1%, it will mark the highest inflation since June 2024. This typically slows economic growth and makes riskier assets like Bitcoin and Ethereum less attractive. This scenario could signal a decline for riskier assets.
Scenario 2: If CPI Comes in at 3.1% as Expected; Neutral but Slightly Hawkish
According to the analyst, this situation could push Fed Chair Jerome Powell to take a hawkish stance and keep risk appetite limited until he sees more clarity from the central bank.
Scenario 3: CPI Below 3.1%: A Bullish Catalyst for the Crypto Market
The most positive scenario for cryptocurrencies is a CPI below 3.1%. This is because low inflation increases the likelihood of interest rate cuts, encouraging liquidity inflows into riskier assets like stocks and cryptocurrencies. This could be the green light the market has been waiting for. It could provide new momentum for Bitcoin and Ethereum to rise.