The U.S. Consumer Price Index (CPI) remained unchanged in May, surpassing the predictions of economists who expected a 0.1% increase. This figure was lower than the 0.3% rise seen in April. On a year-over-year basis, the CPI showed a 3.3% increase, slightly lower than both analyst forecasts and the previous month’s reading of 3.4%. The core CPI, which excludes volatile food and energy prices, saw a 0.2% increase in May, outperforming expectations of a 0.3% rise and beating April’s 0.3% increase. Year-over-year, the core CPI was up 3.4%, slightly below the anticipated 3.5% and April’s 3.6% rise.
Bitcoin (BTC) experienced a surge in price to $69,400 following the release of the inflation data, marking a nearly 4% increase over the past 24 hours. Inflation rates had been decreasing in 2022 and 2023 as the Federal Reserve raised interest rates. However, in recent months, inflation levels have remained higher than the Fed’s 2% target, dampening expectations of rate cuts. Earlier this year, traders had anticipated multiple rate cuts in 2024, but the most recent CPI report suggests that the first cut may not occur until September.
According to a report by K33 Research, cryptocurrency prices have been particularly responsive to U.S. economic data. The recent uptick in inflation figures, coupled with reduced expectations of rate cuts, caused bitcoin’s price to drop from its all-time high above $73,000 in March to below $57,000 in May. Traders are now looking towards looser monetary policies to drive the next phase of the crypto rally towards new record highs.
While the U.S. is holding off on rate cuts, several major central banks around the world have already begun to lower their benchmark rates. The European Central Bank and Bank of Canada recently announced rate cuts, resulting in the U.S. dollar index (DXY) reaching a one-month high.
Investors are eagerly awaiting the release of the Federal Market Open Committee members’ interest rate projections, known as the “dot plot.” This data, set to be released later today, could have a significant impact on asset prices moving forward. As global economic conditions continue to evolve, market participants will be closely monitoring central bank policies and economic indicators for potential investment opportunities.