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Crypto sinks lower despite news of falling inflation rates

The latest consumer price index data shows that the rate hit 8.3% in April.

The central theses

  • Yesterday, the US annual inflation rate came in at 8.3%, slightly above economists’ expectations but 20 basis points below March’s reading.
  • The prevailing view among economists is that inflation rates may have peaked in April, meaning the Fed may not have to do anything unexpected in terms of tightening in the coming months.
  • The crypto market tumbles despite the news, with the overall market down about 13.5% on the day.

According to data released Wednesday by the US Bureau of Labor Statistics, the CPI for April fell to 8.3% year-on-year, 20 basis points lower than the 41-year high inflation rate the economy recorded in March.

April CPI is at 8.3%

April CPI data suggests USinflation may have already reached its peak.

According to the latest inflation data from the US Bureau of Labor Statistics, the CPI rose 0.3% from April, bringing the US annualized inflation rate to 8.3%, or 20 basis points lower than the March CPI.

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Housing, food and airplane show indexes saw the highest price increases, while the energy index fell 6.1% over the month after rising 11% in March.

The Bureau’s data was broadly in line with economists’ expectations, who estimated consumer price inflation of 0.2% for the month and 8.1% for the year.

Although inflation rates are still teetering at four-decade highs, the data for April resembles a marked improvement from what the economy has seen so far.

For comparison, March CPI print showed that inflation rose 1.2% over the month to hit a 41-year high of 8.5%.

There is a loose consensus among economists that inflation likely peaked in April and will slowly decline in the coming months.

Market participants consider this scenario to be relatively optimistic as it could mean that the Fed will need less tightening to bring CPI down to the 2% target.

If high consumer prices alone can drive inflation (which measures not the level, but the rate at which consumer prices are rising), the Fed – which is already embarking on aggressive monetary tightening – is less likely to keep interest rates above 50 raise basis points or increase the planned interest rate of its quantitative tightening or balance sheet reduction program.

This could mean that credit remains relatively cheap, government and corporate debt is easier to refinance, and more disposable income remains for investment within the economy.

However, the crypto market has not responded well to the news of falling inflation rates. The two biggest cryptocurrencies and , down 8.8% and 10.8% respectively on the day, struggling to recover even slightly on the news.

The crypto market as a whole is down 13.5%, a move largely prompted by the catastrophic dissolution of the Terra ecosystem. The native governance token of the Blockchain and their flagshipstablecoin have lost around $43 billion in value over the past week in a so-called “death spiral” event, which has seen the UST stablecoin back away from its desired $1 target and the LUNA “withdrawing.” it.

Source: Crypto News Deutsch

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