Inflation Data Suggests Fed May Pause Rate Cuts in November

According to CoinDesk, inflation in the U.S. came in stronger than expected in September, as indicated by the government's Consumer Price Index (CPI) report released Thursday morning. The CPI rose 0.2% in September, surpassing economist forecasts of 0.1% and matching the 0.2% increase in August. On a year-over-year basis, the CPI was up 2.4%, slightly above the expected 2.3% and just below the 2.5% recorded in August.Core CPI, which excludes the more volatile food and energy costs, increased by 0.3% in September, exceeding forecasts of 0.2% and consistent with the 0.3% rise in August. Year-over-year, core CPI was higher by 3.3%, compared to the anticipated 3.2% and the 3.2% seen in August.The stronger-than-expected inflation data has reinforced the notion that the Federal Reserve may not cut interest rates by 50 basis points in November, and might even choose to hold rates steady. This sentiment has been reflected in the price of bitcoin, which has been under pressure for the past ten days and fell further following the release of the CPI report. Bitcoin was last trading at $60,800, down nearly 2% from 24 hours prior.In September, the Federal Reserve surprised many by initiating its rate-cutting cycle with a larger-than-expected 50 basis point cut, instead of the anticipated 25 basis point reduction. This move sparked a significant rally in cryptocurrency prices as investors anticipated another substantial rate cut at the Fed's next policy meeting in early November. However, hawkish comments from Fed Chair Jay Powell and other central bank officials, along with a stronger-than-expected employment report last Friday, have led to a major reversal in these expectations over the past ten days. This shift may have contributed to the recent decline in crypto prices.According to CME FedWatch, which translates short-term interest rate market pricing into odds on Fed actions, the chances for a 50 basis point rate cut in November have dropped to zero. Prior to the release of the inflation data, rate markets had priced in a 26% chance that the Fed would not cut rates at all in November, up from 0% just a week ago.Today's inflation numbers are likely to bolster the idea that the Fed may pause any rate cuts in November. However, this could be offset by some weak employment data. Initial jobless claims, which had remained low for many weeks, surged to 258,000 last week from 225,000 previously, against forecasts of 230,000. It remains unclear how much of this increase was influenced by the aftermath of Hurricane Helene.