Bitcoin surged after July’s CPI data showed that inflation began to decline after months of record levels.
Similar to previous cases, the price of Bitcoin climbed to near $24,000.
CPI Report Boosts Bitcoin Price
according to Consumer Price Index Report (CPI) Data from the U.S. Bureau of Labor Statistics on Wednesday showed consumer costs were unchanged and inflation was at 8.5%.
Until then, analysts expect the index, which analyzes price changes across various products and services, to rise 0.2% to show annual inflation of 8.7%.
The Dow Jones Industrial Average, Nasdaq, S&P 500 and NYSE all rose sharply after the Bureau of Labor Statistics released July inflation data. Also, the value of precious metals and cryptocurrencies rose on Wednesday. Against the U.S. dollar, Bitcoin surged in value by nearly 4%, gold gained 0.35%, and silver gained 1.43%.
BTC/USD trades close to $24k. Source: TradingView
Inflation, as measured by headline CPI, rose 0.0% mom in July, well below June’s high monthly rate of 1.3%. Monthly core inflation fell to 0.3% in July. 1/ pic.twitter.com/6bVTZq7m1W
— Council of Economic Advisers (@WhiteHouseCEA) August 10, 2022
According to the July 2022 Consumer Price Index (CPI) report, the Consumer Price Index (CPI-U) for all urban consumers rose 1.3% in June but remained steady in July. On a seasonally adjusted basis, the All Items index was up 8.5% from the previous 12 months. The inflation report added:
“The gasoline index fell 7.7% in July, offsetting gains in the food and housing index, resulting in the All Items index unchanged for the month.”
Focus turns to September FOMC meeting
Analysts expect core inflation to rise to 6.1% from 5.9%, pushing the Fed to raise interest rates further in September. However, CPI data suggest that recent rate hikes are having a cooling effect on the economy.
Still, Citigroup economists forecast another 75 basis points, driven by strong jobs data and faster-than-expected pay growth. But if core inflation is higher than expected, it could also rise by 100 basis points.
Federal Funds Effective Rate (Source: FRED)
The current CPI rate is 9%, and investor Stanley Druckenmiller said, “Inflation has never come back from above 5% without federal funds being higher than CPI.”
If inflation has peaked, the Fed will not need to raise rates as sharply as it has so far this year.
In response to rising interest rates that have slowed growth, institutional investors have shifted from more speculative assets such as tech stocks and cryptocurrencies to relatively stable investments such as corporate bonds and U.S. Treasuries.
Featured image from Getty Image, charts from FRED and TradingView.com