Wednesday’s in-line CPI report avoided the upside surprise that could have rattled risk assets, but inflation remains too hot to give the Fed an all-clear, analysts said.
Headline inflation at 3.4% remains well above the Fed’s target, while energy prices are nearly 15% higher than a year ago, noted Daniela Hathorn, senior market analyst at Capital.com. That should keep inflation front and center after Fed Chair Kevin Warsh stressed the need to prevent elevated prices from damaging the economy.
Hathorn said markets now price roughly 60% odds of no change in September versus 40% for a 25 basis-point hike. A month ago, market participants saw only 30% chance of a pause versus 70% odds for hiking rates, according to CME FedWatch.
For crypto, the report takes an immediate inflation shock off the table without offering much fuel for a breakout. Ryan Lee, chief analyst at Bitget Research, said the print “neither forces a hawkish re-pricing nor delivers a clear dovish catalyst,” leaving bitcoin traders to focus on ETF flows, liquidity and derivatives positioning while awaiting Jackson Hole and more inflation data.
Iggy Ioppe, CIO at Theo, struck a similar note, arguing that keeping rates unchanged still amounts to effective easing given current inflation and labor-market conditions and should support risk assets over the medium term.
Both Ioppe and Lee pointed to Thursday’s PPI report as the next test for inflation.
