10.11.202107:32 Forex Analysis & Reviews: Investors braced for US CPI which could update 30-year high

Meanwhile, US stock indices are extending a steady rally. We have already discussed in previous articles that market conditions in a few next months will be beneficial for the bullish trend of Bitcoin and the US stock market. Investors can be certain about this. The reasons are obvious. I have also expanded on this. First, high inflation is lingering in the US. Moreover, it has been accelerating its pace of growth. This pushes investors into high-yielding assets with a view to protecting their savings. Second, the Fed's QE program is still going on, so the US economy is being pumped up with liquidity which is flowing into financial markets. These are the main reasons why the US stock market is still on the rise with prospects of a further growth for at least a few months. Another argument is that the Federal Reserve will hardly raise interest rates until the next summer. There is a 99% chance of this scenario. Nevertheless, let me remind you that soaring inflation could trigger the polar opposite scenarios.

For example, let's imagine that inflation might go down from today and return back to the annual rate of 3-4%. In this case, the US Fed will not have to rush about tapering its stimulus. Moreover, if the US labor market's recovery slows down, the central bank could announce in February – March that stimulus tapering is suspended for a while. Let's consider another option which is more feasible. Inflation will persist at a faster pace despite the fact that the Fed is withdrawing monetary stimulus. In this case, both the stock and the crypto markets will see investments flooding for the simple reason. Nobody wants to watch their savings dwindling. Today traders will get to know the actual inflation rates for October. The question is whether it increased at all. There have been cases when actual readings did not match expectations. In fact, most analysts predicted that the Bank of England would raise the key interest rate by 0.15% last week. However, the forecast went wrong.

Back to the US CPI, consumer inflation might have remained at 5.4% in October in annual terms or the CPI might have logged an uptick to 5.5% on year. There is a likelihood that inflation could not have jumped to 5.8% as the consensus says. In principle, any CPI reading is viewed as elevated nowadays. Thus, any CPI score above 5% will serve as another bullish catalyst.

Another thing. Some Fed officials do not downplay the threat of persistent high inflation. Half a year ago, Fed Chairman Jerome Powell said that high inflation was transitory. He has reiterated the same idea recently, though noted that consumer prices might remain elevated for longer than originally expected. In other words, the Fed leader could state a few months later that consumer inflation will remain soaring for another couple of years. When the market finds out the wording "a transitory phenomenon", they expect it to last for less than half a year, but not a few years. According to fresh estimates, inflation in the US could ease a pace of growth not until the second half of 2022.