Bitcoin rallied after CPI data for July showed that inflation had begun to decline after several months of record levels.
Similar to the previous cases, the price of Bitcoin rose by close to $24,000.
CPI Report Boosts Bitcoin Price
according to Consumer Price Index (CPI) Report Released by the US Bureau of Labor and Statistics on Wednesday, consumer costs remained unchanged, bringing inflation at 8.5%.
Before that, analysts had expected the index, which analyzes price changes across a wide range of products and services, to rise 0.2% to reveal that inflation would be 8.7% year-on-year.
After the US Bureau of Labor Statistics released its inflation data for July, the value of the Dow Jones Industrial Average, Nasdaq, Standard & Poor’s 500 and New York Stock Exchange rose sharply. Moreover, the value of precious metals and cryptocurrencies rose on Wednesday. Bitcoin is up nearly 4%, gold is up 0.35%, and silver is up 1.43% relative to the dollar.
BTC/USD trades close to $24k. Source: TradingView
The inflation rate as measured by the main CPI rose by 0.0 percent month-on-month in July, well below its monthly high rate in June of 1.3 percent. The monthly core inflation rate fell in July to 0.3 percent. 1/ pic.twitter.com/6bVTZq7m1W
– Council of Economic Advisers (WhiteHouseCEA) August 10, 2022
According to the Consumer Price Index (CPI) report for July 2022, the Consumer Price Index for all urban consumers (CPI-U) increased 1.3% in June but remained flat in July. Before the seasonally adjusted, the All Items Index rose 8.5 percent over the previous 12 months. The inflation report adds:
“The gasoline index fell 7.7 percent in July and offset the increases in the food and shelter indices, which left the index for all substances unchanged during the month.”
Focus turns to the Federal Open Market Committee’s September meeting
Analysts expect core inflation to rise from 5.9% to 6.1%, prompting the Federal Reserve to raise interest rates further in September. However, CPI data indicates that recent interest rate hikes are having a cooling effect on the economy.
However, Citigroup economists expected another 75 basis points increase, buoyed by strong jobs data and faster-than-expected wage growth. But if core inflation comes in higher than expected, there is also a chance of a 100 basis point rise.
Federal Funds Effective Rate (Source: FRED)
The current CPI rate is 9%, and investor Stanley Druckenmiller has said that “inflation has never fallen above 5% without Fed money rising above CPI.”
The Fed will not need to raise interest rates as much as it has so far this year if inflation has peaked.
In response to higher interest rates slowing growth, institutional investors have moved away from more speculative assets such as tech stocks and cryptocurrencies and turned toward relatively more stable investments, such as corporate bonds and US Treasuries.
Featured image from Getty Image, charts from FRED and TradingView.com