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After CPI data, One percentage interest increase is now feasible.

14-Sep-2022 By: Shikha Jha
After CPI data, One

Today's announcement of the Consumer Price Index is 

Bad news for the cryptocurrency industry.

Instead of the anticipated 8.1% inflation, the CPI data shows an 8.3% YoY increase. Also worse than anticipated is the core CPI. A one percentage point increase in interest rates is now probable as a result of the poor inflation figures, which is detrimental for the cryptocurrency market.

The CME Fed Watch Tool monitors news regarding the upcoming FOMC meeting. It indicated the potential for either a 50 bps increase or a 75 bps increase in interest rates. However, following the poor CPI data, it now indicates a 20% possibility of a 100 basis point (bps) or one percentage point increase.

Why a Rise In Interest Rates Matters For Crypto

Inflation control monetary policy is decided by the Federal Open Market Committee. The Fed has tightened monetary policy qualitatively in response to rising inflation levels. To combat inflation, the FOMC has repeatedly increased interest rates. The Fed increased interest rates by 75 basis points during the meetings of the FOMC in June and July.

The crypto market suffered greatly as a result of the interest rate hike in June. The subsequent interest rate increase, though, did not have the same impact because it was probably already factored in. Similarly, according to analysts, a further 75 basis point increase in interest rates should be anticipated.

However, it is highly possible that the same terrifying conclusion as in June will occur if the Fed raises interest rates by 100 basis points. Each and every Fed official has adopted a combative approach against inflation, and the dismal CPI figures will only serve to reinforce this stance.

Divergent Views On The Next Fed Increase

The 21st of September will mark the date of the following FOMC meeting. Popular CNBC expert Jim Crammer says he is not concerned about the Fed overdoing the hike. Other experts, though, are split.

According to Todd "Bubba" Horowitz of Bubba Trading, Kitco News may expect the Federal Reserve to increase interest rates by 100 basis points as planned.

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