US inflation rises 0.2% in July: Bitcoin falls below $60,000
- The July US inflation report showed a 0.2% increase in the Consumer Price Index (CPI), in line with market expectations, with an annual increase of 2.9%, slightly lower than the 3% forecast.
- The core CPI, which excludes volatile food and energy prices, also rose 0.2% in July, with the annual increase coming in at 3.2%, in line with forecasts.
- Bitcoin reacted modestly to the report, reaching $61,200 before falling back below $60,000, settling around $59,100. Expectations for a rate cut by the Federal Reserve in September remain high, with the majority consensus for a 0.5% cut.
The July report on inflation in the United Statespublished this Wednesday, revealed a 0.2% increase in the Consumer Price Index (CPI).
The figure is in line with market expectations, marking an increase from the 0.1% decline recorded in June. On an annual basis, CPI increased by 2.9%slightly lower than the forecast of 3%, and identical to the June rate.
Core Inflation Analysis
The basic CPIwhich excludes volatile food and energy prices, also saw a increase of 0.2% in July, in line with forecasts, and up from the 0.1% increase in June. Over one year, Core CPI increased by 3.2%, in line with forecasts, but slightly down from the 3.3% observed in June.
Markets and Bitcoin Reaction
Following the publication of the report, the price of Bitcoin continued to rise modestly, reaching around $61,200 before reversing lower, dropping back below $60,000. The market reaction was initially muted, with the inflation report widely anticipated and in line with analysts' expectations.
The fall that followed later, quite brutal, then slowed down, seeing the price of Bitcoin Stabilizes Around $59,100 when writing this article.
Federal Reserve Outlook
The publication of July CPI does not appear to significantly alter expectations regarding Federal Reserve decisions at its next meeting in September. According to the CME FedWatchthe probabilities of a 0.5% reduction in the key rate are slightly in the majority at 52.5%, against 47.5% for a reduction of 0.25%.
Before the report was published, the consensus was that a rate cut at next meeting of the Fed was virtually assured, with no chance that the rate would remain in its current range of 5.25% – 5.50%.
The July inflation report is one of several key economic indicators to watch this month. Tomorrow, markets await the data on initial unemployment benefit claims and retail sales, which will provide further insights into the health of the U.S. economy. Later this month, the Fed Annual Meeting in Jackson Hole will be another pivotal event, often used by Fed chairs to announce or test new monetary policy directions.
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