Breaking: Bitcoin Price Set to Rally as US CPI Inflation Cools to 2.9%
Bitcoin’s price experienced a notable upward momentum following the latest U.S. consumer price index (CPI) data, which shows inflation cooling to 2.9%, according to the U.S. Bureau of Labor Statistics. This moderation in inflation, coupled with a sharper-than-expected reduction in producer price index (PPI) inflation, opens the door for the U.S. Federal Reserve to potentially ease its monetary policy in the near future.
As of Wednesday, U.S. stock futures for the Dow Jones, S&P 500, and Nasdaq Composite remained relatively flat as investors awaited further signals regarding moderate price increases. Meanwhile, cryptocurrency traders had already begun adopting a bullish stance prior to the CPI release, driven by optimism surrounding anticipated Federal Reserve rate cuts, which are expected to commence in September.
Cooling Inflation Data
The annual CPI inflation rate in the U.S. has decreased to 2.9%, down from 3% in June, as reported by the U.S. Bureau of Labor Statistics. On a month-over-month basis, inflation rose by 0.2%, a rebound from the 0.1% decline recorded in June.
In addition, core CPI inflation, which excludes volatile items such as food and energy, has moderated to 3.2%, marking its fourth consecutive month of decline from the previous month’s rate of 3.3%. This represents the lowest core inflation reading since March 2021. The monthly core inflation rate also saw a slight increase to 0.2% from 0.1%, though it remains below the 0.3% recorded the previous month.
The overall easing of inflation across various metrics suggests that the Federal Reserve may be in a position to consider lowering interest rates. However, the central bank is likely to wait for further data, including upcoming jobs reports and personal consumption expenditures (PCE) inflation figures, before making any definitive decisions on rate cuts. The market is currently anticipating a significant reduction in interest rates by the Federal Reserve in September.
The CME FedWatch tool indicates a 50% likelihood of a 50 basis point rate cut in September. Additionally, the tool reflects expectations for up to 100 basis points of rate cuts by the end of the year following the recent CPI data release.
Bitcoin and Ethereum Price Movements
In response to the inflation data, Bitcoin (BTC) saw a substantial price increase, with a 5% rise over the past 24 hours. Currently, Bitcoin is trading at $61,403, with its price fluctuating between a low of $58,788 and a high of $61,572 during this period. Notably, the trading volume for Bitcoin has decreased by 12% in the last 24 hours, suggesting a reduction in market activity.
The favorable CPI and PPI inflation data provide positive indicators for a potential recovery in the cryptocurrency market. However, traders should remain cautious and consider additional macroeconomic data expected later this week before making investment decisions.
Similarly, Ethereum (ETH) has experienced a price increase, trading at $2,733, which represents a 3% gain over the last 24 hours. The price has ranged between a low of $2,633 and a high of $2,775 during the same period. Trading volume for Ethereum has also declined by 19% in the last 24 hours, reflecting decreased trader interest.
Overall, the recent CPI data and the broader economic context suggest a potential rally in Bitcoin and Ethereum prices, driven by expectations of forthcoming monetary policy adjustments. Traders are advised to monitor additional economic indicators and market trends to make informed decisions in this evolving environment.
