US PPI Cools To 1.7%, Is Fed’s 1.25% Rate Cut Plan Still On Table?

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As a seasoned crypto investor who’s been through numerous market cycles, I find myself cautiously optimistic after reading this latest US PPI report. The slight increase in inflation might just be the catalyst we needed for the Federal Reserve to lower interest rates, which could potentially send Bitcoin and other risk-on assets soaring.

The data published by the United States Bureau of Labor Statistics on Thursday indicates that U.S. Producer Price Index (PPI) inflation rose by 0.2% in August. This figure corresponds to the forecast made by Dow Jones earlier, before the actual data was revealed. Notably, this significant inflation indicator arises as speculation mounts about a potential interest rate reduction by the Federal Reserve.

US PPI Report Comes Higher Than Expected

The Producer Price Index (PPI) calculates the prices that manufacturers receive for their final products and services. Excluding food and energy costs, the most recent data indicates a 0.3% rise in the U.S. PPI, which is slightly more than the anticipated 0.2% increase as predicted by experts. Interestingly, this core increase remained consistent even when trade services were not considered.

According to a 12-month analysis, the U.S. Producer Price Index (PPI) experienced a 1.7% rise. Moreover, the figure reached 3.3%, when considering factors other than food, energy, and trade on an annual basis. The PPI increase was largely influenced by service prices, with a notable 0.4% monthly jump observed in sectors such as trade, transportation, and warehousing. Additionally, the spike in guestroom rental (up 4.8%) played a significant role in this measurement.

Chris Larkin, the managing director of trading and investment at Morgan Stanley’s E-Trade division, pointed out that yesterday’s US CPI inflation figure and the jobless claims data matching predictions provides a smooth pathway for the Federal Reserve to initiate a series of interest rate reductions.

There’s a strong expectation that the Federal Reserve might lower interest rates by 0.25% initially, however, the debate will shift towards how much and quickly they might reduce rates in the future.” He also mentioned.

Lower Fed Interest Rates Cut to Boost Bitcoin Price

This week, analysts from Citi forecasted a potential 1.25% reduction in the Federal Reserve’s interest rate by the year 2024 due to declining US Consumer Price Index (CPI) inflation figures. They based this prediction on steady core Personal Consumption Expenditures (PCE) inflation and their emphasis on labor market conditions. With inflation no longer increasing rapidly, a decrease in inflation and subsequent lower borrowing rates could stimulate economic growth in the United States.

In simpler terms, it’s possible that cryptocurrencies such as Bitcoin could significantly increase in value. This would be significant given the current slump and slow growth in the wider crypto market. There’s been quite a bit of concern about an upcoming crypto and stock market crisis, suggested by a leaked memo from the US Securities and Exchange Commission (SEC). However, once interest rates are clarified in the near future, investors might find some certainty, which could lead to more stability in the market.

Right now, Bitcoin’s primary digital currency value stands at approximately $57,780.16, representing a 3.08% rise over the past day. Although there has been some recovery, if you look at its weekly trend, it’s evident that Bitcoin is experiencing a consistent downturn, with both highs and lows showing a decline in value.

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2024-09-12 18:46