Bitcoin surged after July’s CPI data showed that inflation has started to decline after several months of record-breaking rates.
The price of Bitcoin rose to close to $24,000, as in previous instances.
CPI Report: Bitcoin price boosted
The Consumer Price Index (CPI), which the U.S. Bureau of Labor and Statistics published on Wednesday shows that consumer prices remained the same, with inflation of 8.5%.
Analysts had predicted that the index which measures price movements across many products and services would rise by 0.2% annually to show inflation at 8.7%.
After the U.S. Bureau of Labor Statistics released its data on inflation for July, the value of the Dow Jones Industrial Average, Nasdaq, S&P 500, and NYSE indexes all sharply increased. On Wednesday, the price of precious metals as well as cryptocurrencies rose. In relation to the dollar, bitcoin’s value soared nearly 4%. Gold rose by 0.3% and silver rose by 1.433%.
BTC/USD trading close to $24k TradingView
The headline CPI index showed an inflation rate increase of 0.0 percent in July. This is well below the 1.3 percent monthly rise recorded in June. Core inflation for July was 0.3 percent. 1/ pic.twitter.com/6bVTZq7m1W
— Council of Economic Advisers (@WhiteHouseCEA) August 10, 2022
According to the Consumer Price Index report for July 2022 (CPI), the Consumer Price Index for All Urban Consumers, (CPI-U), increased by 1.3% in June but held steady in July. Prior to seasonal adjustment, all item index had increased by 8.5 percent in 12 months. Inflation report:
“The gasoline index fell 7.7 percent in July and offset increases in the food and shelter indexes, resulting in the all items index being unchanged over the month.”
FOMC Meeting in September: The Focus
Core inflation should rise between 5.9% and 6.1% according to forecasts. The Fed will raise its interest rate in September. However, CPI data shows that the recent rate increases are cooling down.
Citigroup economists forecasted a 75-basis point rise, due to strong job data, faster wage growth, and stronger employment numbers than expected. However, a 100-basis point increase is possible if core inflation rises above expectations.
Federal Funds Effective Rate (Source: FRED)
The current CPI rate is 9%, and investor Stanley Druckenmiller said that “Inflation has never come down from above 5% without Fed funds rising above CPI.”
The Fed won’t need to raise rates as much as they have thus far this year if inflation has peaked.
Institutional investors are shifting away from speculative investments like crypto stocks and tech stocks to invest in more stable assets such as corporate bonds or U.S. Treasuries.
Featured image taken from Getty Image. Charts from FRED, TradingView.com.