The price of Bitcoin and other cryptocurrencies got a minor boost following the release of the U.S. Consumer Price Index (CPI) on Tuesday. Bitcoin (BTC) continues to hold its value above $26,500, while Ethereum and BNB rose to $1770 and $247, respectively, as CPI data came to its lowest since March 2021.
The May CPI showed that inflation increased by just 0.1% month-to-month, the equivalent of a 4% annual increment rate. Also, the month-to-month and year-to-year core CPI values came in at 0.4% and 5.3%, respectively, signaling that the US government seems to be winning the war against inflation.
Encouraging Figures
Chief economist at Moody Analytics, Mark Zandi, speaking on the signs of reduced inflation, stated, “The most encouraging thing is the year-over-year growth rates are going to come down pretty sharply. The headline number is going to feel good; it’s going to be encouraging, showing inflation is moving in the right direction. More fundamentally, I think inflation is moving in the right direction.”
A favorable CPI may also be considered a positive for crypto markets after lawsuits against Binance and Coinbase pushed BTC and mostly altcoins to newer lows. However, improving macroeconomic conditions, such as slowing inflation, increases investor appetite for risk-prone assets such as cryptocurrencies. It is noteworthy that the lingering bearish market conditions have largely coincided with a period of tightening monetary policy.
Ball in FED’s Court
The CPI figures are vital tools that the Federal Reserve System uses to ascertain the state of inflation in the country. Analysts predict that lower core CPI values will encourage the FED not to hike interest rates at its next meeting.
The FED hiked interest rates by 25 basis points in its last meeting last month, which it has grown enthusiastic about doing recently. Although bank implosions are under control, inflation data is still far off the FED’s 2% target.
