Key Points
- Bitcoin (BTC) price surges to $61,000 as US CPI inflation cools to 2.9%.
- Market anticipates larger interest rate cut from the US Federal Reserve in September.
New statistics from the US Bureau of Labor Statistics show that the July Consumer Price Index (CPI) reflects an annual inflation rate of 2.9%.
This decrease in inflation has had a ripple effect across the crypto market, pushing the price of Bitcoin (BTC) to the $61,000 range.
Inflation Data and Bitcoin’s Price
The inflation data for July was lower than the predicted 3% and the 3.3% reported in June.
The core CPI, which excludes food and energy costs, rose by 0.2% in July, bouncing back from a 0.1% decrease in June.
However, the CPI for July signified the smallest rise since March 2021.
In recent years, high inflation in the US has caused a spike in the price of consumer goods.
CPI data indicates that grocery store prices are now nearly 25% higher than before the pandemic.
Global conflicts, such as the war in Ukraine, have also led to significant supply chain disruptions, resulting in increased prices.
Yet, inflation has shown signs of slowing in recent months.
The 0.1% decrease in inflation recorded in June marked the lowest monthly growth rate since May 2020.
While this may not lead to lower consumer goods prices, Bitcoin saw a quick uptrend following the announcement of the July CPI data.
Generally, positive US CPI and PPI inflation data suggest a smooth recovery in the crypto market.
Bitcoin and Other Cryptocurrencies
At the time of writing, BTC is trading at $61,385, showing a 4.5% increase in the last day.
The trading volume rose by 1.6% to over $31 billion in the same time frame.
This increase is substantial as Bitcoin has been experiencing short-term volatility in the past few weeks.
The rise in Bitcoin’s price can also be attributed to bullish crypto traders capitalizing on buy-the-dip calls in anticipation of future price increases.
In line with macroeconomic trends, altcoins also made impressive moves.
Ethereum (ETH), the second-largest digital currency, surged by 3% in the last 24 hours to trade at $2,755.
On the other hand, the prices of the Dow Jones, S&P 500, and Nasdaq Composite remained stable after the CPI report announcement.
This could be because investors are looking for signs of moderate price increases.
Anticipated Interest Rate Cuts
Experts believe the slowing CPI print will allow the US Federal Reserve to start easing its monetary policy.
Specifically, the market is betting on a larger interest rate cut from the Federal Reserve in September.
Before announcing its plans to lower interest rates, the central bank will still wait for future PCE inflation statistics and jobs data.
Meanwhile, the question of whether the U.S. Federal Reserve would cut its benchmark fed funds rate range at the bank’s next meeting was closed before this morning’s data.
Data from the CME FedWatch tool shows a 50% chance of a 50 basis point rate drop in September and odds of 100 bps rate cuts by the Fed this year.
