Bitcoin Soars to $24,000 as CPI Report Shows Inflation Cooling

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

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.”

U.S. President Joe Biden also touched on the CPI data and said new legislation and domestic semiconductor production have boosted the nation’s economic activity. According to Biden, The lack of semiconductors kept car prices high last year, accounting for a third of core inflation. “The U.S. is leading the way again, and CHIPS and science law have fueled our efforts to manufacture semiconductors domestically.”

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.

bitcoin

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



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