On October 13, the United States released the Consumer Price Index (CPI) for September, up 0.4% compared to the previous month.
Higher-than-expected inflation in the world’s largest economy usually indicates further hikes in the US interest rate, historically negative for risk assets. However, contrary to expectations, stocks, bonds, and crypto assets closed higher.
Bitcoin, for example, rose 7.8 percent from US$18,372 to over US$19,800. At almost the same time, the Dow Jones Industrial Average (DJIA) found a bottom at US$28,709, which on the same day rose 4.6 percent, closing at US$30,038. Bonds also rose but did not recover all the losses.
For some analysts, this move may have reflected the idea that US inflation is nearing a ‘peak’, and that the worst is over.
It is worth remembering that for most of this year, BTC registered a strong correlation with the stock market amid rising interest rates in the United States, which put pressure on risk asset prices.
As the correlation has almost disappeared recently, analysts are beginning to speculate whether the move is here to stay. But soon after, bitcoin and ethereum pulled back, showing that investors remain cautious.
The pressure on stocks and cryptos, which are already down sharply year-to-date, is expected to increase as the next meeting of the Fed’s monetary policy committee on November 1 and 2 approaches. According to the minutes of the September meeting, interest rate adjustments should remain high until inflation falls significantly.