CPI: JPMorgan, Other Banks Predict Hot Inflation for Months, Bitcoin to Fall Below $60,000?

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The U.S. Bureau of Labor Statistics reported a 3.5% increase in the Consumer Price Index (CPI) for March. This figure is crucial for the Federal Reserve as it may decide the timing for potential interest rate reductions. However, some financial institutions, referred to as Wallet Street banks, predict an uptick in inflation before it declines again. With the robust economy continuing to show strength, the Fed might postpone any rate cuts for a longer period.

Bitcoin‘s price surge is facing challenges from several factors, including a strong US dollar, rising 10-year Treasury yields, tightening regulations, and uncertainty surrounding the impact of halving on its price. Some experts predict that increasing inflation could make it hard for Bitcoin to reach $100,000.

Wall Street Banks Anticipate Hotter Inflation for Months

Based on their assessments, JPMorgan, Citi, Goldman Sachs, Morgan Stanley, Barclays, HSBC, UBS, BMO, and Citadel predict that inflation will stay high for the next few months. These banks expect the Consumer Price Index (CPI) inflation rate to be higher than previously projected, around 3.4%.

According to Bank of America’s forecast, headline Consumer Price Index (CPI) inflation is projected to be 3.3%. However, both Wells Fargo and Scotiabank predict a higher inflation rate of 3.5%. The CPI inflation rate for February was actually higher than anticipated at 3.2%. Additionally, the most recent releases of Producer Price Index (PPI) and Personal Consumption Expenditure (PCE) inflation data showed elevated levels as well.

According to prediction market Kalshi, the anticipated inflation rate is around 3.4%. However, traders hold a different perspective, expressing their belief that inflation will ultimately exceed this figure. The probability, as suggested by Kalshi, stands at approximately 43% for US inflation to reach the range of 2-2.9% in the current year.

Rate Cuts Starting in September

According to a report from CoinGape, the signals from the Fed swaps initially suggested that the U.S. Federal Reserve would hold off on rate cuts in June and July. Instead, they might begin cutting rates as early as September. However, recent developments indicate that rate cuts are now anticipated to occur in November instead.

FED SWAPS SHIFT FULL PRICING OF RATE CUT TO NOVEMBER FROM SEPT

— *Walter Bloomberg (@DeItaone) April 10, 2024

Alternatively, according to the CME FedWatch Tool, the Federal Reserve has a 51% likelihood of reducing rates by 0.25 percentage points in June and a 49% probability in July. Data from September suggests a 40% chance of additional 0.25 percentage point cuts in interest rates.

In a stern announcement this week, JPMorgan’s CEO, Jamie Dimon, cautioned that interest rates could potentially reach as high as 8%, given the ongoing inflationary pressures caused by budget deficits and geopolitical conflicts.

The US dollar index (DXY) has decreased to around 104 today from a peak of 105 in early April. Federal Reserve representatives, such as Neel Kashkari and Jerome Powell, have underlined the importance of examining additional inflation figures before contemplating any rate adjustments. These Fed officials have become increasingly cautious in their statements.

Additionally, the US 10-year Treasury yield bounces back up to 4.5% from 4.35%, marking a new high since November. The trend for Bitcoin, however, goes against this as it moves in the opposite direction of both the DXY and the 10-year treasury yield. With CPI inflation figures coming in above the anticipated 3.2%, the Fed may have room to delay further interest rate increases.

Bitcoin to Fall Below $60,000 After CPI?

Some analysts continue to express pessimism towards Bitcoin’s price because of anticipated volatility following the halving event. In contrast, Markus Thielen has forecasted that the price of Bitcoin could drop to $62,000 and Ethereum to $3,100 due to insufficient trading volumes. It is essential for traders to monitor significant resistance levels for Bitcoin at $68,330 and Ethereum at $3,460.

According to analysts like Benjamin Cowen and Peter Brandt, Bitcoin’s price could drop below $60,000 based on historical trends. During previous Spot Bitcoin ETF applications and halving events, the cryptocurrency has followed a similar pattern.

Additionally, Arthur Hayes, a co-founder of BitMEX, voiced worries about limited availability of US dollars, intensifying the downward trend in cryptocurrency markets.

The price of Bitcoin (BTC) dropped by nearly 3% to reach $68,200 within the last 24 hours. In the same period, the open interest for BTC decreased by more than 3%. Additionally, the open interest for CME Bitcoin Futures declined by approximately 4%.

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2024-04-10 20:01