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Bitcoin (BTC) price rises after the consumer price index rose less than expected
The U.S. consumer price index (CPI) remained flat in May, beating economists’ forecasts of a 0.1% increase and down from 0.3% in April.
On a year-over-year basis, the consumer price index rose 3.3%, compared to analysts’ forecasts and the previous month’s 3.4%.
The core CPI, which excludes food and energy costs, rose 0.2% in May, better than forecasts of a 0.3% increase and April’s 0.3%. On a year-over-year basis, core CPI rose 3.4% versus expectations of 3.5% and April is 3.6%.
Bitcoin (BTC) welcomed weak inflation, which jumped to $69,400, up nearly 4% in the last 24 hours.
After inflation numbers fell rapidly in 2022 and 2023 as the Federal Reserve raised interest rates, the trend stalled in previous months at levels stubbornly higher than policymakers’ 2% target, pouring cold water on market participants’ expectations of rate cuts.
Earlier this year, traders had forecast five or six 25 basis point (bps) cuts in 2024 by the end of December, which narrowed to one or two before today’s CPI report, and the first cut will not it will take place until September, according to estimates. FedWatch tool for ECM showed.
Recently, cryptocurrency prices have been “highly sensitive” to US economic data, K33 Research noticed in a report earlier this week. Recent higher inflation data and resulting diminished hopes for rate cuts pushed bitcoin’s plunge from all-time highs above $73,000 in March to below $57,000 in May. Traders expect looser monetary conditions to fuel the next leg of the cryptocurrency rally to record prices.
In contrast to US expectations, several key central banks globally have already started lowering key rates with the European Central Bank and Bank of Canada cutting rates last week, which helped push US dollar index (DXY) at one-month high.
Investors will also be closely watching the Fed’s “dot plot,” to be released later today, of interest rate projections from members of the Federal Market Open Committee, which could influence asset prices.