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Consumer Price Index or CPI is a key index that measures price change over a period of time. The data measures the increase or decrease in the price paid by the consumers on a monthly basis. The U.S. Bureau Of Labor Statistics reveals the CPI for the United States.
The BLS calculates the CPI by considering a number of commodities and services essential to an average US consumer. Moreover, the agency reveals that all the commodities fall under eight major categories. They include food and beverages, housing, apparel, transportation, medical care, recreation, education and communication, and other goods and services.
CPI reveals important information about the state of the economy. Consequently, the Federal Reserves consider the CPI as an important indicator of inflation.
How CPI Can Effect Crypto
The Consumer Price Index highlights key information about the U.S. economy. A high year-over-year(YoY) increase in the CPI represents inflation in the economy. As a result, the Federal Reserve curbs inflation by raising interest rates and quantitative tightening. Such a hawkish stance brings volatility to the market, including the crypto market.
In June, the CPI showed a YoY increase of 9.1%. The Fed responded with a 75 bps interest rate hike. As a result, the crypto market experienced a significant downturn. Consequently, Bitcoin suffered its worst financial quarter in over a decade.
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