The American Consumer Price Index (CPI) remained stable in May, surpassing economists’ expectations of a 0.1% increase and down from April’s 0.3%. On an annual basis, the CPI increased by 3.3%, compared to analysts’ forecasts and the previous month’s reading of 3.4%.
The CORE CPI, which excludes food and energy costs, rose by 0.2% in May, better than the expected 0.3% increase and down from April’s 0.3%. Year-over-year, the CORE CPI increased by 3.4% against expectations of 3.5% and April’s 3.6%.
Bitcoin (BTC) welcomed the low inflation, jumping to $69,400, up nearly 4% in the last 24 hours. After inflation figures dropped rapidly in 2022 and 2023 as the Federal Reserve raised interest rates, the trend halted in the past months at levels stubbornly above policymakers’ 2% target, dampening market expectations for rate cuts.
Earlier this year, traders anticipated five or six 25 basis point (bp) rate cuts in 2024 by the end of December, which dwindled to one or two before today’s CPI report, with the first cut not taking place until September, as shown by the CME FedWatch tool.
Crypto prices have recently been “highly sensitive” to US economic data, noted K33 Research in a report published earlier this week. The recent higher inflation figures and dwindling hopes of rate cuts that ensued propelled bitcoin from a record high above $73,000 in March to under $57,000 in May. Traders expect looser monetary conditions to fuel the next leg of the Crypto rally towards record prices.
Contrary to US expectations, several key central banks worldwide have already begun lowering their benchmark rates, with the European Central Bank and the Bank of Canada cutting rates last week, helping propel the US Dollar Index (DXY) to a one-month high.
Investors will also closely monitor the Fed’s “DOT plot,” which will be released later in the day, on the interest rate projections of Federal Open Market Committee members, which could move asset prices.
Edited by Kevin Reynolds. Learn more about Consensus 2024, CoinDesk’s longest-running and most influential event that brings together all sides of crypto, blockchain, and Web3. Head to consensus.coindesk.com to register and buy your pass now.