US Inflation Exceeds Forecasts, Fueling Fed Rate Hike Speculation
The Consumer Price Index for October in the US surpassed expectations, strengthening bets for Federal Reserve rate hikes and leading to declines in gold and cryptocurrency markets.
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The US Consumer Price Index (CPI) for October rose by 0.4% month-on-month, exceeding market forecasts of a 0.3% increase. This data, combined with hawkish statements from Federal Reserve officials, intensified discussions around the likelihood of more aggressive rate hikes by the Fed.
Federal Reserve Governor Christopher Waller indicated that the central bank should raise short-term borrowing costs next month, even if inflation showed signs of slowing. Waller also suggested that a half-point rate increase should be considered if the inflation outlook worsened, as highlighted by Bloomberg.
The higher-than-expected inflation figures and the Fed's hawkish stance led to significant drops in gold and silver markets. According to Anadolu Agency, spot gold prices fell over 2%, trading around $4,050 and breaking below the key $4,100 support level. Silver also declined by more than 1.5% to $51 per ounce. Analysts note that higher interest rates typically diminish the appeal of non-yielding assets like precious metals.
The cryptocurrency market also experienced selling pressure. Cointelegraph reported that Bitcoin (BTC) dipped towards its 11-week lows near $73,500. Anadolu Agency data showed Bitcoin trading at $73,759, with its weekly loss approaching 5%. Ethereum (ETH) also saw a 1.20% decline, falling to $2,068. The total global crypto market capitalization decreased by approximately 1.31% in the last 24 hours.
Prior to the inflation report, CME Group's FedWatch Tool indicated that markets were pricing in a 96.3% chance of a 25-basis-point rate hike at the Fed's December meeting. Following the CPI data, these odds shifted, with the probability of a 25 bps hike decreasing to 85.3%, while the likelihood of a more aggressive 50 bps hike rose to 14.7%.