U.S. CPI Unexpectedly Flat in October; Bitcoin Adds Nearly 1%

U.S. inflation data for October was better-than-hoped, with the headline Consumer Price Index (CPI) flat for the month versus economist forecasts for a rise of 0.1%. The core rate rose just 0.2%, beating expectations for 0.3%.

Checking all the numbers, the CPI for October was unchanged versus economist forecasts for a rise of 0.1% and September's 0.4% gain. On a year-over-year basis, CPI was higher by 3.2% versus expectations for 3.3% and 3.7% in September.

The core CPI – which strips out food and energy costs – rose 0.2% in October against forecasts for 0.3% and September's 0.3%. On a year-over-year basis, core CPI was higher by 4.0% versus 4.1% expected and 4.1% in September.

The price of bitcoin [BTC] knee-jerked higher by nearly 1% in the minutes following the news to just shy of $36,700.

While headline CPI inflation has been receding for months, it has stayed above the U.S. Federal Reserve's 2% target. In addition, the core rate had stubbornly remained above 4% for several months running. Fed members have hinted that they're interested in perhaps one more rate hike before finally ending what's now a roughly 20-month monetary tightening cycle.

"This is good news folks," wrote Joseph Brusuelas, chief economist at RSM. He noted that core goods prices actually declined 0.2% in October. "Expect more disinflation moving forward especially as shelter costs ease into mid-2024," he added.

Prior to this morning's report, traders were pricing in about an 86% chance the Fed would hold rates steady at its next meeting in mid-December, and there's roughly a 75% chance of a continued pause at the January meeting, according to the CME FedWatch Tool. Shortly after the data, the odds of a December pause rose to 99.5% and for a January pause to 95.6%.

Traditional markets are flying following the good inflation news, with Nasdaq 100 futures gaining 1.9% and S&P 500 futures higher by 1.4%. The 10-year Treasury yield is lower by 16 basis points to 4.476%.