On Tuesday, June 13th, markets reacted positively to the release of inflation data.
The US inflation rate increased by 0.1% in May. This inflation figure represents a 4% increase over the past 12 months, which meets the Federal Reserve’s economic expectations. But is it enough for the Fed to slow down its aggressive monetary policy?
According to the Consumer Price Index summary a report For the month of May, published by the US Bureau of Labor Statistics, US inflation reached its lowest annual level in the past two years.
However, with the exception of volatile food and energy prices, core inflation remains high. This could hinder the Fed’s decision to cut interest rates.
Will the Fed change its aggressive monetary policy amid rising US inflation?
On Tuesday, markets reacted positively to the release of inflation data. However, the reaction was choppy as some analysts had predicted because many investors prefer to wait for the Fed’s announcements on interest rates, which will be published at its next meeting scheduled for Wednesday.
Moreover, it is important to take into account the upward trend in various indicators, including housing prices, used car prices, transportation services, and more. While these indicators saw relatively modest increases compared to April, the Fed should not ignore their continued growth.
However, some analysts such as Jeffrey Roach, chief economist at LPL Financial, have indicated that the “encouraging trend in consumer prices” may allow the Fed to keep interest rates unchanged, at least in the short term. He even mentioned that if the healthy trend continues, the Fed will likely stop raising interest rates for the rest of the year.
Volatility dominates the cryptocurrency market
The report revealed a divergence between the various components of the index that reflects changes in the prices of goods and services, which strongly affect the general economic situation and the Federal Reserve’s policies.
Right now, the cryptocurrency market is reacting with the same volatility that it usually shows in response to the release of this data. BTC increased by almost 2%, from $25,900 to $26,433. However, at the time of this writing, the price has seen a 2.6% decline affecting the majority of cryptocurrencies, which have been experiencing a significant recovery.
ETH, which also saw a 1.6% gain, saw a decline of 2.58% from its peak of $1,770 to $1,724. Even XRP, which gained 10% thanks to its victory over the SEC, ended up falling behind with BTC.
XRP price drop by 10%. Photo: TradingView
Therefore, it is too early to declare victory in the cryptocurrency market. The real test will come tomorrow, when the Fed will announce whether it will continue with its aggressive policy or will finally get there, allowing the markets to recover.
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Marco is a passionate journalist with a deep addiction to cryptocurrency and a keen interest in photography. He is fascinated by trading and market analysis. He has more than 5 years of experience working with cryptocurrency projects.
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