U.S. inflation data was released recently, confirming the downward trend in inflation for the second consecutive month and reviving expectations for a reduction after they faded following strong jobs data . The digital currency market reacted positively to the data and Bitcoin saw an increase of over 4% in a matter of moments.
CPI inflation data
- Monthly performance: It was Consumer Price Index (CPI) In the United States, it remained stable in May. That's better than expectations for a 0.1% rise and less than 0.3% in April.
- Annual performance: On an annual basis, the consumer price index rose 3.3%, slightly below expectations of 3.4% and below the previous month's figure of 3.4%.
Core CPI details:
- Monthly performance: The core CPI, which excludes food and energy costs, rose 0.2% in May. This figure is lower than the expected increase of 0.3% and April's increase of 0.3%.
- Annual performance: On an annual basis, the core CPI rose 3.4%, better than the 3.5% expected and below April's 3.6%.
Market reactions and economic impacts
Bitcoin (BTC):
- Price increase: I received Bitcoin The decline in inflation data was welcomed, reaching $69,400, up almost 4% in the past 24 hours.
- Sensitivity to economic data: Bitcoin and other cryptocurrencies have shown great sensitivity to US economic data. Recent subdued inflation figures have revived hopes of a possible interest rate cut by the Federal Reserve, which is seen as a positive for the cryptocurrency market.
The Federal Reserve and interest rates:
- Inflation trends: After a significant decline in inflation in 2022 and 2023 following the Fed's aggressive interest rate hikes, the trend has recently stalled at levels above the Fed's 2% target.
- Market Forecast: Earlier this year, traders expected five or six 25 basis point rate cuts in 2024. However, that expectation was revised to one or two cuts ahead of the latest CPI report, with the first cut not 'not expected until September, according to CME FedWatch.
- points points: Investors are closely watching "points" to be released later today by members of the Federal Open Market Committee (FOMC) outlining their interest rate expectations, which could have a significant impact on asset prices.
Global central banks:
- Lower interest: Contrary to the US position, several major central banks around the world, including the European Central Bank and the Bank of Canada, have already started cutting interest rates. This pushed the US Dollar Index (DXY) to its highest level in a month.
summary
US CPI data for May indicated a lower-than-expected inflationary scenario, sparking a positive reaction in the cryptocurrency market, particularly Bitcoin. The Fed's future interest rate decisions, influenced by these inflationary numbers, remain a priority for investors. At the same time, interest rate cuts by global central banks run counter to the U.S. approach, further complicating the global economic landscape. Investors and market observers are awaiting additional information from the Fed, which will provide more clarity on the direction of interest rates and monetary policy in the future.
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