CPI Higher Than Expected

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2022-11-28 14:53:46

Market fell after CPI was announced

After the CPI was announced higher than expected, the US stock market ended a session with a sharp drop. The Dow Jones Industrial Average fell 3.94%, the S&P 500 fell 4.32% and the Nasdaq fell 5.16%. Stock futures were more stable in light green. Gold price is still around 1713 USD/ounce. And oil is still flat at 87 USD/barrel.

The crypto market is no exception. The Bitcoin price has dropped from $22,000 to around $20,000, a decrease of 9%. Altcoins also trended lower.

Bitcoin is back to the level since late August. The price fell rapidly in a short time causing a relatively large amount of leveraged orders to be liquidated. The number of leveraged orders after a few days of growth has returned to pre-bullish levels. However, the margin ratio is still high.

The consumer price index, which tracks a wide range of goods and services, has risen 0.1% for the month and 8.3% over the past year. Excluding fluctuating food and energy costs, CPI Core increased by 0.6% month-on-month and 6.3% month-on-month in 2021. Although the inflation rate of 8.3% was lower than the 8.5% rate of the month. before, but it was higher than economists’ estimates. Most of the big companies and banks previously predicted the CPI at only 7.9% to 8.2%.

CPI fell because energy prices fell by 5% in the month, leading to a decrease in the petroleum index by 10.6%. However, those declines were offset by increases in some other sectors. The food index rose 0.8 percent in August and accommodation costs, which account for about a third of the CPI, rose 0.7 percent and 6.2 percent from a year ago. Medical care services also increased strongly, up 0.8% on the month and up 5.6% compared to August 2021. New car prices also increased, up 0.8% while used cars fell 0.1%.

Inflation in the US is currently happening evenly across many different fields. It makes the Fed more difficult to manage than focusing on only a few areas such as petroleum and energy. The next meeting of the Fed will be held on September 21. To date, many investors fear that the Fed may increase by 0.75% and even 1% this month.

After a few days of slight decline, the DXY index rose again after the CPI was announced. Rising CPI makes investors believe that the Fed will raise interest rates, making the USD stronger.

Although the information was not good, the action of the FED was predictable to continue raising interest rates, possibly higher, to control inflation. For long-term investors who follow the averaging method, the price will not be too affected by this information.

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