The U.S. inflation data for October 2023 presented a better-than-expected scenario, bringing a sense of relief to economists and markets alike. The headline Consumer Price Index (CPI), a key measure of inflation, remained flat over the month, defying forecasts of a 0.1% increase. This stability follows September’s 0.4% gain. Annually, the CPI rose by 3.2%, slightly below the anticipated 3.3% and lower than September’s 3.7%.
The core CPI, which excludes volatile food and energy costs, also showed a modest rise of just 0.2% in October, falling short of the expected 0.3% increase and matching September’s rate. Year-over-year, the core CPI was up by 4.0%, marginally lower than the predicted 4.1% and consistent with September’s figures.
This cooling in inflation sparked a positive reaction in the cryptocurrency market, with Bitcoin (BTC) witnessing a nearly 1% surge in its value, approaching $36,700 shortly after the data release.
Despite the slowdown in headline CPI inflation, it remains above the U.S. Federal Reserve’s target of 2%. The persistently high core rate, remaining above 4% for several months, had raised concerns. However, the Fed now hints at potentially one more rate hike before concluding its approximately 20-month monetary tightening cycle.
Joseph Brusuelas, Chief Economist at RSM, hailed the report as “good news.” He highlighted the 0.2% decrease in core goods prices in October and anticipated further disinflation, particularly as housing costs are expected to moderate into mid-2024.
The report significantly influenced market expectations for the Federal Reserve’s upcoming meetings. Before the data’s release, traders estimated an 86% probability of the Fed maintaining current rates in December 2023. Post-release, these odds soared to 99.5%, with a 95.6% chance of a continued pause in January, as per the CME FedWatch Tool.