The US November inflation print has landed as a rather confusing number, making many confused about how the US Fed will perceives the numbers for the upcoming rate cuts.
As per the official announcement on December 11th, US inflation increased to 2.7% in November, being in line with market expectations. However, the number exceeded the rate of inflation at 2.6% in October.
However, despite the rather confusing inflation numbers, Bitcoin prices were stable after the data was released. At the press time, the price was Bitcoin is up only 0.6%, having not reacted to the news much.
US Inflation Numbers Raise Worry About Fed’s Upcoming Decision
The inflation for November has made many wonder as to what the Fed might weigh as its options for the upcoming meeting. The inflation print is one of the most important metric that the Fed considers before deciding on cutting rates.
The Bureau of Labor Statistics’ data released highlights worries about sticky inflation after an increase in October.
As the Fed struggles with its dual mandate to keep inflation close to 2 percent and maintain a healthy labor market, it is less certain where interest rates will go next year, though it is widely anticipated that the Fed will cut them by one quarter point next week for the third consecutive quarter.
US Debt Could See Rise Amid Inflation Concerns
The US debt at present is at an all time high level, standing at $36.2 trillion. Usually inflation prints and rate decisions have always impacted the debt of a nation.
The federal government’s borrowing costs can be momentarily decreased when the Fed lowers interest rates. The reason for this is that the government can borrow new funds and roll over old debts at reduced interest rates.
If the US debt does start to reduce, investor risk appetite can in return increase, making more capital available for crypto investments.
How Will Crypto Markets React To Upcoming Fed Rate Decision?
Crypto markets are highly sensitive to rate decisions given that investor risk appetite depends on Fed’s rate decision. Investors typically find government securities less appealing when rates are lowered because lower yields can result in a smaller return. In this situation, investors’ risk tolerance increases, which increases the appeal of assets like Bitcoin.
The entire cryptocurrency market may be extremely rangebound and volatile in the final month of 2024 if the next meeting next week does not see another rate cut.
In order to improve its trajectory, the market, which is currently experiencing a volatile phase as a result of ongoing geopolitical tensions and waning Trump victory, will need to find encouraging signals in the future.