Hot September CPI Lifts Hike Odds as Bitcoin and Ether Slide

U.S. consumer prices rose 0.6% in September from August on a seasonally adjusted basis, up from 0.4% the month before, according to Bureau of Labor Statistics index data released at 8:30 a.m. ET on Oct. 14 (source 1). Those monthly rates are Le Coin arithmetic from the published index levels, 336.298 in September against 334.131 in August, and they match how Kalshi's September CPI contract settled: "above 0.5%" resolved yes and "above 0.6%" resolved no (sources 1, 4).

Core prices, which exclude food and energy, rose 0.3% on the month, against 0.3% in August, on Le Coin arithmetic from the index levels (source 1). Kalshi's core contract settled the same way, with "above 0.2%" yes and "above 0.3%" no (source 4).

From a year earlier, headline CPI was up 3.7% in September, from 3.4% in August, and core was up 2.6%, from 2.4%, on Le Coin arithmetic from the unadjusted index (sources 1, 2). The headline rate is now more than a point above core. In our view, that puts the pressure in food and energy rather than the core basket.

Energy did the work

The energy index rose 5.2% in September after 2.1% in August, on Le Coin arithmetic from the BLS seasonally adjusted series (source 1). Food barely moved, up about 0.05% (source 1). Shelter rose about 0.4%, services about 0.4% and core goods about 0.25% (source 1).

The objection is that energy is volatile and often reverses. In our view, that is fair for one month. The tell is core: services and core goods both ran faster than in August, so the print was not only gasoline.

Monthly and yearly rates, and the BTC and ETH percentage moves, are Le Coin arithmetic. BLS rounds its own published rates from unrounded data, so its published figures can differ by a tenth. The BLS release page itself blocked our requests on Oct. 14, so these figures come from BLS's data API and FRED rather than the release text (sources 1, 2).

What traders see for October

At 2:16 p.m. ET, the last traded prices in Kalshi's October Fed decision market (KXFEDDECISION-26OCT) were 69 cents for "Fed maintains rate" and 31 cents for "Hike 25bps," with both cut contracts and the larger hike at 1 cent or less (source 3). Read as probabilities, that is roughly a 69% chance of a hold and a 31% chance of a quarter-point hike, in a market that closes Oct. 28.

The move came on the print. Kalshi's trade history shows the last "Hike 25bps" trade before 8:30 a.m. ET at 18 cents, at 8:28:51 a.m. ET, and a burst of "Fed maintains rate" trades, all stamped 8:27:55 a.m. ET, at prices from 82 to 88 cents (source 6). Kalshi's one-minute candle ending at 8:30 a.m. ET closed with the hike contract bid at 17 cents and offered at 18, and the hold bid at 82 and offered at 83 (source 6). In a fresh check at 2:20 p.m. ET, the hike contract last traded at 30 cents and the hold at 67 cents (source 6).

On Le Coin arithmetic, the hike contract gained 12 cents from its last pre-print trade to its last trade at 2:20 p.m. ET, and the hold's 2:20 p.m. ET last trade of 67 cents was 15 cents below its 82-cent bid at 8:30 a.m. ET (source 6). Kalshi's API also lists a "previous price" of 19 cents for the hike and 82 cents for the hold (source 3); we use the timestamped trade history as the before figure because it is tied to an exact time.

CME FedWatch, which derives probabilities from 30-day fed funds futures, gives a separate read, but one that predates the release. In its table stamped 2:13 a.m. ET on Oct. 14, more than six hours before the CPI print, CME FedWatch put the chance of a hold at the current 3.75% to 4.00% target at 65.1% and the chance of a hike to 4.00% to 4.25% at 34.9% for the Oct. 28 meeting (source 7). A day earlier, Oct. 13, those were 77.9% and 22.1%, and a week earlier, Oct. 7, 82.3% and 17.7% (source 7). Because the stamp is before 8:30 a.m. ET, these figures do not reflect the September CPI data.

Our inference is that a hot headline with firm core keeps cuts off the table and gives the hike case a hearing. The objection is that core at 0.3% is not an acceleration, and the Fed targets the personal consumption expenditures index, not CPI. The tell will be whether officials describe energy as transitory.

How it reaches crypto

The first channel is real yields. The 10-year TIPS yield was 2.91% on Oct. 9 and the 5-year 2.68%, the latest FRED shows, with the nominal 10-year at 5.24% (source 2). FRED had not posted Oct. 14 values at access, so today's move in real yields is not confirmed here. Higher real yields raise the return on cash and Treasurys, and assets with no yield, bitcoin included, compete with that.

The second channel is the dollar. The Fed's broad trade-weighted dollar index stood at 121.60 on Oct. 9 (source 2). A hotter print that pushes rate expectations up tends to support the dollar, and in our view a stronger dollar tightens conditions for risk assets priced in dollars. The objection is that this link breaks down often; the tell is whether the index prints higher for Oct. 14.

The third is financial conditions broadly. A market pricing a 31% chance of a hike (source 3) is pricing tighter money. Our inference is that leveraged crypto positions feel that first.

Bitcoin and ether moved on the print

Coinbase Exchange data shows bitcoin closed the 8:25 a.m. ET five-minute candle at $83,785.93 (source 5). The 8:30 a.m. ET candle opened at $83,801.36, had a high of $83,858.78 and a low of $82,633.01, closing at $82,794.40 (source 5). By 2:16 p.m. ET the last trade was $81,539.01, down 2.7% from before the release, on Le Coin arithmetic (source 5).

Ether followed. It closed the 8:25 a.m. ET candle at $2,514.22, hit $2,519.26 in the 8:30 a.m. ET candle, closed that candle at $2,482.86 and traded at $2,426.17 at 2:16 p.m. ET, down 3.5% (source 5). Volume in the 8:30 a.m. ETH candle was about 5,083 ETH, against 608 in the five minutes before (source 5).

The objection is that crypto falls on plenty of days, and six hours is a long window to pin on one number. The tell is the timing: between 8:15 and 9:05 a.m. ET, the largest five-minute volume in both assets came in the release candle, and from 8:35 a.m. ET through 2:16 p.m. ET neither traded back above its 8:25 a.m. ET close (source 5).

Sources

1. U.S. Bureau of Labor Statistics, CPI public data API v2, accessed 2:16 p.m. ET.
2. FRED, Federal Reserve Bank of St. Louis, accessed 2:16 p.m. ET.
3. Kalshi, KXFEDDECISION-26OCT, accessed 2:16 p.m. ET.
4. Kalshi, KXCPI-26SEP and KXCPICORE-26SEP, accessed 2:16 p.m. ET.
5. Coinbase Exchange public API, BTC-USD and ETH-USD, accessed 2:16 p.m. ET.
6. Kalshi, KXFEDDECISION-26OCT trade history, candlesticks and snapshots, accessed 2:20 p.m. ET.
7. CME FedWatch, Oct. 28 FOMC probabilities, data as of 2:13 a.m. ET Oct. 14 (01:13:32 CT), from a live check of the probability table, accessed 2:25 p.m. ET.

Holding the Corner.

Not financial advice.