What to Expect from US CPI as Morgan Stanley Sees Fed to Keep Rate Unchanged?

The crypto market, as well as the broader financial sector, now awaits the upcoming US CPI data for cues on the potential move of the Federal Reserve with its rate hike plan. Morgan Stanley offered temporary relief earlier today, saying that it expects the US central bank to keep the rates unchanged at its September gathering.

However, the latest US jobs data has fueled discussions, as it has topped Wall Street expectations. With the hotter-than-anticipated nonfarm payroll data weighing on investors’ sentiment, market participants now eagerly await the inflation data next week.

US CPI in Focus as Jobs Data Fuels Concern

The financial sector, as well as the crypto market, is eagerly waiting for next week’s US CPI and PPI inflation data for cues on economic health. Notably, concerns over a potential Fed rate hike in September are already weighing on market sentiment, given the current inflationary pressures.

On the other hand, the latest US Nonfarm Payroll data showed that the nation has added 162K jobs, soaring past the Wall Street expectations of 53K. This has further amplified concerns, as the data suggests that the economy stayed resilient despite the soaring prices.

In other words, it would allow the US Federal Reserve to move with hawkish monetary policy plans, which in turn could hamper riskier assets like crypto. According to the CME FedWatch Tool, the odds of a likely Fed rate hike now sit at over 60%.

Meanwhile, Morgan Stanley said that the August US CPI is expected to come in at 0.23% on a monthly basis, as compared to 0.1% recorded in the prior month. The bank also suggested that core PCE inflation will come in at 0.2%, while the revision data will lower the annual core inflation to 3.1% from 3.3%.

Morgan Stanley Expects Fed to Hold Rate

In a recent X post, market commentator Walter Bloomberg said that Morgan Stanley expects the US Fed to maintain its policy rate at their September gathering. Although this comment has offered some relief to market participants, the stronger-than-anticipated US jobs data has dampened sentiment.

As a result, Bitcoin and the broader crypto market retreated today, signaling the cautious stance of investors. It’s worth noting that earlier this week, JPMorgan also said that it expects the US CPI to be more crucial than the jobs data to gauge the Fed’s stance on its rate plans.

Having said that, investors are now treading cautiously ahead of the US CPI and PPI inflation data next week. If the data exceeds market expectations, it could wipe out the recent surge in the crypto market, while raising bets of a potential 25 bps Fed rate hike in September.

Meanwhile, investors looking to hedge their portfolios against macroeconomic uncertainty are increasingly utilizing the best crypto prediction markets to trade binary outcomes on Federal Reserve interest rate decisions.