In May, the Consumer Price Index in the United States remained stable, contradicting economists’ predictions and indicating a slowdown in inflation.
Following the release of inflation data, the price of Bitcoin has witnessed a significant increase, reaching $69,400.
Investors are holding their breath as they await the ‘dot plot’ from the Federal Reserve tonight.
The recent data on the Consumer Price Index (CPI) in the United States showed an unexpected stability in May, with an unchanged CPI, defying economists’ forecasts of a 0.1% increase.
Compared to April’s 0.3% increase, this stagnation marks a notable slowdown. On an annual basis, the CPI has increased by 3.3%, slightly below expectations and the previous month’s reading of 3.4%.
Core CPI Detail
The core CPI, which excludes volatile food and energy costs, recorded a 0.2% increase in May, falling short of expectations for a 0.3% increase and matching April’s figure. On an annual basis, the core CPI increased by 3.4%, below the forecasted 3.5% and April’s rate of 3.6%.
These figures suggest a trend towards disinflation, offering potential relief for the markets, particularly digital assets which have been under pressure recently.
Bitcoin Reaction to Inflation Data
Bitcoin has responded positively to this new inflation data, with its price reaching $69,400, representing an increase of almost 4% in the past 24 hours. This rise follows a period of significant price decline, marked by a drop from its all-time high of over $73,000 in March to less than $57,000 in May.
The recent fluctuations in cryptocurrency prices have been heavily influenced by US economic data, with investors adjusting their expectations for interest rates based on inflation signals.
Global Perspectives and Implications for Interest Rates
While initial expectations predicted five to six 0.25% interest rate cuts in the United States by the end of 2024, expectations have narrowed to one or two cuts before today’s CPI report, with the first cut anticipated in September.
In contrast, several major central banks around the world have already started lowering their benchmark interest rates, including the European Central Bank and the Bank of Canada last week, contributing to a one-month high for the US Dollar Index (DXY).
Investors are also eagerly awaiting the release of the Federal Reserve’s ‘dot plot’ later in the day, which could have a significant impact on asset prices. This chart of interest rate projections by members of the Federal Open Market Committee could provide new insights into the future direction of US monetary policy.
