The inflation figures from the United States are out, and they bring no major surprises. Yesterday, the US Department of Commerce released new data, revealing that inflation in October stood at 2.3% compared to a year earlier.
On a monthly basis, the increase was 0.3%, the same as in September. For crypto enthusiasts, the highlight is that following this news, Bitcoin’s price surged and climbed back above $95,000.
Understanding Inflation Figures
Inflation is often measured using the PCE index (Personal Consumption Expenditures). This index serves as a thermometer for the price increases of goods and services purchased by consumers. It’s especially important as it is the preferred inflation gauge for the US central bank, the Federal Reserve.
There’s also the Core PCE inflation metric, which excludes volatile food and energy prices. On an annual basis, Core PCE rose by 2.8%, a slight increase compared to September. Month-over-month, this core inflation metric also rose by 0.3%.
What Drives Inflation?
The increase in inflation was primarily driven by higher service costs, which rose by 0.4% in October. These include categories such as healthcare and housing, where rent prices, for example, increased by 0.4%. In contrast, the prices of goods rose more modestly, by just 0.1%. Energy prices even dipped slightly, falling by 0.1% month-over-month, while food costs remained mostly unchanged.
The US Federal Reserve plays a crucial role in controlling inflation, primarily by adjusting interest rates. Higher interest rates make borrowing more expensive and saving more attractive, which helps cool the economy.
Will Interest Rates Go Down Again?
The Fed has already lowered interest rates twice in recent months. Now, all eyes are on their next meeting on December 17–18. A further rate cut could help Bitcoin up.
Fed Chair Jerome Powell recently indicated that inflation is “reliably” moving toward their 2% target. This suggests they might pause further rate cuts for now. However, many economists believe there’s still room for a small 0.25% rate reduction before the year ends.
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