Consumer Price Index Update

The Consumer Price Index (CPI) increased by 0.2% on a seasonally adjusted basis after a decline of 0.1% in June, according to the U.S. Bureau of Labor Statistics. Over the last 12 months, the index has risen by 2.9% before seasonal adjustment, slightly below the anticipated 3% increase by economists.

Key Drivers

The rise was primarily driven by higher housing costs. When excluding food and energy, the core CPI increased by 0.2% monthly and 3.2% annually, meeting expectations.

The annual rate is the lowest since March 2021, and the core rate is the lowest since April 2021, as reported by the Bureau of Labor Statistics.

Effects on Crypto

Bitcoin (BTC) was up 2.97% but fell nearly 1% after the inflation report was released. According to Juan Leon, senior investment strategist at Bitwise, the core inflation above 3% indicates that the Federal Reserve doesn’t have a clear signal to start cutting rates, which Bitcoin is anticipating.

As of publication, the price of Bitcoin is around $59,276 according to The Block’s BTC price page.

Market Insights

A dovish shift in monetary policy is seen as bullish for risk assets like Bitcoin. Bitfinex analysts noted that easing inflation concerns could lead to increased liquidity as investors expect lower interest rates, making speculative assets more attractive.

They predict that Bitcoin may gain upward momentum, testing key resistance levels between $64,000 and $65,000.

Most economists expect at least a 25-basis-point cut to interest rates at the Fed’s upcoming meeting in September. In their last meeting, the Fed maintained rates at 5.25% to 5.5%.

Leon adds that apart from core inflation, labor market data will play a vital role for BTC moving forward, as ongoing weakness there could encourage the Fed to start cutting rates in September.