The U.S. Consumer Price Index (CPI) was flat in May, beating economist forecasts for a 0.1% rise and down from 0.3% in April.
On a year-over-year basis, CPI was up 3.3%, compared to analyst forecasts and the previous month’s reading at 3.4%.
The core CPI, which excludes food and energy costs, rose 0.2% in May, better than forecasts for a 0.3% rise and versus 0.3% in April.. Year-over-year, core CPI rose 3.4% against expectations for 3.5% and April’s 3.6%..
Bitcoin (BTC) welcomed the soft inflation read, jumping to $69,400, up nearly 4% over the past 24 hours.
After inflation readings rapidly fell in 2022 and 2023 as the Federal Reserve jacked up interest rates, the trend stalled in the previous months at stubbornly higher levels than policymakers’ 2% target, pouring cold water on market participants’ expectations of rate cuts.
Early this year, traders anticipated five or six 25 basis points (bps) cuts in 2024 by the end of December, which shrunk to one or two before today’s CPI report with the first cut not happening until September, the CME FedWatch Tool showed.
Crypto prices have been “highly sensitive” to U.S. economic data recently, K33 Research noted in a report earlier this week. The recent hotter inflation figures and resulting diminished hopes for rate cuts propelled bitcoin’s tumble from all-time high prices above $73,000 in March to below $57,000 in May. Traders anticipate that looser monetary conditions will fuel the crypto rally’s next leg to record prices.
Contrasting the U.S. expectations, several key central banks globally have already started to lower benchmark rates with the European Central Bank and Bank of Canada cutting rates last week, which helped to propel the U.S. dollar index (DXY) to a one-month high.
Investors will also watch closely the Fed’s “dot plot” to be released later today of the Federal Market Open Committee members’ interest rate projection, which could move asset prices.