Inflation Slows Down in the US, Prompting Mixed Reaction in Bitcoin Market

Consumer price growth in the United States experienced a slowdown in June, with annual rates dropping from 4% to 3%, falling slightly below the predicted 3.1%. In response, Bitcoin saw a surge, reaching the $31,000 milestone and achieving a daily growth rate of 1%. Monthly price increases stood at 0.2%, twice as fast as May but surpassing economists’ expectations of 0.3%.

However, core inflation, which excludes food and energy prices, still showed a significant rise of 4.8% annually and 0.2% monthly. Although these figures were lower than the previous readings of 5.3% and 0.4% respectively, they were still higher than analysts’ projections of 5% and 0.3%. The US Federal Bureau of Labor Statistics’ released data has raised the possibility of the Federal Reserve limiting its planned two key rate hikes before the year’s end to just one.

This statistical release influenced global markets, resulting in an increase in risk appetite. S&P 500 futures rose by 0.67%, the euro gained 0.4% against the US dollar, and gold prices increased by 0.6% due to the weakened US currency. While Bitcoin initially reacted positively to the news, its gains were short-lived, and its value returned to pre-release levels within 30 minutes. A similar pattern was observed in Ethereum, which experienced a temporary surge to $1900 before retracting.

Despite the data’s impact on market sentiment, it did not significantly alter expectations regarding the Federal Reserve’s upcoming meeting on July 25-26. The probability of a key rate increase dropped marginally from 93% to 92.4%, according to the futures market. The likelihood of further tightening of policy before year-end also diminished, with the odds decreasing from 1:3 to 1:7 for September. Analysts have emphasized that regulatory clarity in the US and a sustained decline in core inflation are crucial factors for a bullish market for Bitcoin. Standard Chartered has previously predicted a price increase to $50,000 this year and $120,000 by the end of the following year.