Title US Inflation Rate Surge – Fed’s Approach

The inflation rate in the United States increased by 0.1% in May. This means that inflation has increased by 4% over the past year, which meets the expectations of the Federal Reserve. However, it is uncertain whether this increase will be enough for the Federal Reserve to slow down its aggressive monetary policy.

The US Bureau of Labor Statistics has published the Consumer Price Index Summary report for May, which shows that inflation in the US has reached its lowest annual level in the past two years.

However, underlying inflation remains high when excluding the volatile prices of food and energy. This could make it difficult for the Fed to reduce interest rates.

Will the Fed Change Its Aggressive Monetary Policy amid US Inflation Rate Surge?

The markets reacted positively to the publication of inflation data on Tuesday. However, many investors are waiting for the Fed’s announcement regarding interest rates at its upcoming meeting on Wednesday. It is important to consider the upward trend in various indicators, including housing prices, used vehicle prices, transportation services, and more. While these indicators have had relatively modest increases compared to April, their continuous growth should not be overlooked by the Fed.

Chief economist at LPL Financial, Jeffrey Roach, suggested that the “encouraging trend in consumer prices” could allow the Federal Reserve to keep rates unchanged, at least in the short term. He even stated that if the trend continues, it is possible that the Fed will stop raising rates for the rest of the year.

Volatility Takes Hold of the Cryptocurrency Market

The report revealed a divergence among the different components of the index reflecting changes in commodity and service prices, which strongly influence the overall economic situation and the policies of the Federal Reserve.

As for the cryptocurrency market, it has reacted with the same volatility it typically shows in response to the publication of this data. BTC increased by almost 2%, from $25,900 to a peak of $26,433. However, at the time of writing this note, the price has experienced a 2.6% decline that has affected the majority of altcoins, which were experiencing a significant recovery.

ETH also saw a 1.6% rise, but is currently experiencing a 2.58% decline from its peak of $1,770 to a low of $1,724. Even XRP, which had achieved a 10% increase thanks to its victory against the SEC, ended up declining along with BTC.

It is therefore premature to declare victory in the crypto market. The real test will come tomorrow, when the Fed announces whether it will persist with its aggressive policy or finally yield, thereby allowing the markets to recover.

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