CPI & CORE CPI Affects Monetary Policy

Tonight, financial markets will closely monitor the US Consumer Price Index (CPI) and Core CPI (Core CPI) reports. These indexes are important measures of inflation, and their results will have a major impact on the monetary policy decisions of the US Federal Reserve (Fed).

1. Consumer Price Index (CPI): CPI measures the price change of a basket of consumer goods and services. If the CPI rises higher than expected, this indicates inflation is escalating, which could cause the Fed to consider continuing or increasing the pace of interest rate hikes.

2. Core Consumer Price Index (Core CPI): Core CPI excludes food and energy prices because they often fluctuate widely. This is a more stable measure of inflation. Core CPI growth could also put pressure on the Fed to tighten monetary policy.

  • Fed Chairman Jerome Powell Speaks

Fed Chairman Jerome Powell will give a speech immediately after the CPI indexes are published. His speech will be closely watched to find out the Fed's views on inflation and interest rate policy in the near future.

- If CPI and Core CPI increase: Powell may emphasize the need to maintain or increase interest rates to control inflation. This could put pressure on stock and cryptocurrency markets, but could also increase the value of the USD.

- If CPI and Core CPI are lower than expected: Powell may show more flexibility in adjusting interest rates, even considering the possibility of reducing interest rates in Q3 if inflation shows signs of slowing down. This could support risk asset markets, including stocks and cryptocurrencies.

  • Impact on the Market

1. Stock and cryptocurrency markets: Investors will be watching carefully to adjust their portfolios. A hawkish message from Powell (implying higher interest rates) could send markets lower, while a dovish message (implying interest rates could fall) could boost the market.

2. USD: Higher interest rates often increase the value of the USD relative to other currencies. Conversely, lower interest rates could weaken the dollar.

👉Conclusion

The announcement of CPI and Core CPI along with Fed Chairman Jerome Powell's speech will play an important role in shaping market expectations about US monetary policy in Q3. Investors should Prepare for high volatility in financial markets, depending on the results and message Powell delivers.