Surprising Stability: October's Unchanged U.S. CPI, Bitcoin Gains 1%

The October report on U.S. inflation presented an unexpected positive turn, outperforming economists' predictions. The headline Consumer Price Index (CPI) remained stagnant, defying projections of a 0.1% increase, while the core rate exhibited a 0.2% uptick, surpassing the anticipated 0.3%.

Upon closer examination, the October CPI aligned with economist forecasts for a 0.1% increase, diverging from the 0.4% gain in September. On a year-over-year basis, the CPI indicated a 3.2% rise, slightly below the expected 3.3% and the September reading of 3.7%.

The core CPI, excluding food and energy components, saw a 0.2% increase in October, falling short of the expected 0.3% and echoing September's outcome. Year-over-year, the core CPI demonstrated a 4.0% increase, marginally lower than the projected 4.1% and the preceding month's figure.

In response to the announcement, Bitcoin's value surged by nearly 1%, reaching just below $36,700 in an immediate market response.

Despite consistent months of declining headline CPI inflation, it has consistently remained above the U.S. Federal Reserve's 2% target. Additionally, the core rate, excluding volatile elements, persistently hovered above 4% for several consecutive months. Federal Reserve members had hinted at the potential for one more rate hike before concluding the approximately 20-month-long cycle of monetary tightening.

Joseph Brusuelas, RSM's chief economist, expressed positivity, highlighting a 0.2% decline in core goods prices in October. He anticipated further disinflation, especially as shelter costs ease into mid-2024.

US October CPI: core inflation up 0.2% m/m and 4% y/y. Core goods actually declined .02 on the month. Expect more disinflation moving forward especially as shelter costs ease into mid 2024. This is good news folks. pic.twitter.com/0E431jDhwY

— Joseph Brusuelas (@joebrusuelas) November 14, 2023

Before the report, traders estimated an 86% likelihood of the Fed maintaining rates at the upcoming mid-December meeting, with a 75% chance of a continued pause in January, according to the CME FedWatch Tool. Post-release, the odds of a December pause surged to 99.5%, and for a January pause, they increased to 95.6%.

In response to the encouraging inflation news, traditional markets witnessed an upswing, with Nasdaq 100 futures climbing by 1.9% and S&P 500 futures rising by 1.4%. Concurrently, the 10-year Treasury yield decreased by 16 basis points to 4.476%.

Read More: Bitcoin Retreats to $34.2K Preceding U.S. Nonfarm Payrolls Announcement