What this CPI means

So today, September 13th at 8:30am ET, the CPI (consumer price index) numbers for August were released to the public. And I know there is a legitimate point that the numbers may be manipulated, or otherwise not completely accurate. But regardless, these are the numbers that the FED is going to be using to determine their path forward for interest rates.

The headline inflation, or the total amount of inflation in the markets including energy and food went up by 3.7%, which is slightly higher than what the expectations were at 3.6%. However core CPI fell to 4.3% from 4.7% in July, which can be considered somewhat positive. What both of these numbers show us is that the majority of the increase in inflation was due to energy, which alone rose 5.6%. And since the FED has a much lower impact on energy prices, this may mean that the interest rates are working.

Now currently, the official probability of the FED raising rates even further at their upcoming September 20th meeting is incredibly low. The current stats are a 97% chance of a pause. However, at the November meeting there is a much closer to 50/50 chance of raising yet again. It all depends on future numbers and employment data, but the picture has been pretty clear: higher for longer. In fact, the first month in which the chance of a rate cut is higher than 50% is July of 2024.

Even worse is the fact that the average citizen of the United States is not feeling real inflation easing at all. Food and housing prices continue to go up, wages are sluggish to increase, and fewer and fewer people are able to afford the sort of life they could easily have lived even 10 years ago. In other words, there is still a long ways to go to achieve even manipulated CPI numbers, let alone actually improve the economy for the average citizen.

So in relation to crypto markets, these higher for longer interest rates are going to exert downward pressure and further decrease overall liquidity. For long-term investors, this may be a perfect period of time to accumulate assets for when rates finally do go down and money is back in the system. For traders, there may be more downside to trade. But most importantly, as an investor OR trader, it's important to keep in mind your risk vs. reward. Your future self will thank you