Fueling investors’ rate cut hopes, a recent report unveiled a smaller-than-expected consumer price index (CPI), signaling a potential meltdown in US inflation. This inflation report sparked speculation about upcoming interest rate reductions. The cryptocurrency market attempted a price surge following the release of the CPI data.
Responding to the cooled inflation data, Bitcoin and Ethereum experienced significant price increases, climbing to $61,679.03 and $2,775.28 respectively. However, subsequent market volatility pulled Bitcoin down to $59,266.94 and Ethereum to $2,645.18, representing declines of 0.26% and 0.16% respectively.
According to the report published by the US Bureau of Labor Statistics, the consumer price index (CPI)dropped to 2.9% in July compared to 3% in June. This marked a continued slowdown in inflation, easing pressure on the Fed to maintain aggressive monetary tightening. While core inflation, which excludes volatile food and energy prices, also moderated, it remained elevated at 3.2% compared to 3.3% in the previous month.
Citi’s Chief Global Economist Nathan Sheets told Yahoo Finance that the report aligns closely with expectations and supports the Federal Reserve’s outlook for continued easing of inflation in the U.S. economy.
Market participants are convinced that the data is a sign for the Fed to begin easing its monetary policy sooner rather than later. The CME FedWatch tool showed a growing probability of a 50 basis point interest rate cut in September is 50%, with expectations for a total of 100 basis points in cuts by the end of the year.
While recent inflation data has fueled rate cut hopes, experts caution that the overall economic outlook remains uncertain. Upcoming reports on employment and consumer spending will significantly influence the Federal Reserve’s policy decisions.
The stock market showed a mixed reaction to the CPI data. The Dow Jones gained 165 points, and the S&P 500 rose with 5.89 points. However, Nasdaq Composite fell by 44.78 points. Investors are now looking ahead to upcoming economic reports to gauge the general state of the economy and the outlook for corporate profits.
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