CPI and PPI releases are imminent, putting rate hike expectations to the test
A major macro test over the next 48 hours: September CPI will be released at 20:30 Beijing time on October 14 (Wednesday), followed by PPI at 20:30 on October 15 (Thursday). This is the last inflation report before the late-October FOMC meeting. Whether the market’s “no hike in October, hike in December” pricing holds up depends on these two days.
Background: The Fed just raised rates by 25 basis points in September, to 3.75%–4.00%. Minutes from the meeting showed that most officials thought another hike would be needed this year. But September’s nonfarm payrolls came in far below expectations—just 29,000 new jobs versus 90,000 expected—and the unemployment rate rose to 4.2%. The odds of an October hike plunged from 70% to less than 20%. Current pricing: no change in October (84%); a December hike (around 70%).
Remember the warning from August: core CPI rose 0.3% month over month, above the 0.2% expected.
My take: This time, focus on the “direction,” not the “number.” If core CPI holds at 0.2% month over month or lower, rate hike expectations will continue to cool. But if it comes in at 0.3% or higher, the specter of an October hike will return, Treasury yields will surge, and 83,000 for $BTC will be in jeopardy—the prediction market has already put the odds of touching $80,000 in October at 67%.
Strategy: Don’t bet on the direction before the data; reduce leverage on oversized positions first. The dividing line is core CPI at 0.2% month over month: below that, bulls get some breathing room; above it, bears take over.
A major macro test over the next 48 hours: September CPI will be released at 20:30 Beijing time on October 14 (Wednesday), followed by PPI at 20:30 on October 15 (Thursday). This is the last inflation report before the late-October FOMC meeting. Whether the market’s “no hike in October, hike in December” pricing holds up depends on these two days.
Background: The Fed just raised rates by 25 basis points in September, to 3.75%–4.00%. Minutes from the meeting showed that most officials thought another hike would be needed this year. But September’s nonfarm payrolls came in far below expectations—just 29,000 new jobs versus 90,000 expected—and the unemployment rate rose to 4.2%. The odds of an October hike plunged from 70% to less than 20%. Current pricing: no change in October (84%); a December hike (around 70%).
Remember the warning from August: core CPI rose 0.3% month over month, above the 0.2% expected.
My take: This time, focus on the “direction,” not the “number.” If core CPI holds at 0.2% month over month or lower, rate hike expectations will continue to cool. But if it comes in at 0.3% or higher, the specter of an October hike will return, Treasury yields will surge, and 83,000 for $BTC will be in jeopardy—the prediction market has already put the odds of touching $80,000 in October at 67%.
Strategy: Don’t bet on the direction before the data; reduce leverage on oversized positions first. The dividing line is core CPI at 0.2% month over month: below that, bulls get some breathing room; above it, bears take over.