US Inflation Slows Down in July, Bitcoin and Ethereum Rally

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Sead Fadilpašić

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Sead Fadilpašić

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Sead specializes in writing factual and informative articles to help the public navigate the ever-changing world of crypto. He has extensive experience in the blockchain industry, where he has served...

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October 23, 2023 08:51 EDT

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July’s US consumer price index (CPI) has seen an annual rise of 8.5%, or smaller than expected, suggesting an inflation peak and potential cool-off, after hitting 9.1% in June. 

Bloomberg-surveyed economists estimated that inflation would show an 8.7% annual increase this July, and a 0.2% increase compared to June.

Also, in July, annual core CPI – which excludes prices of food and energy – was the same as in June (5.9%) and lower than estimated (6.1%). 

Both bitcoin (BTC) and ethereum (ETH) jumped right after the announcement. BTC rallied from USD 23,100 and briefly spiked above USD 24,000, increasing its daily gains to 3% (at 13:21 UTC), while ETH jumped from USD 1,710 to USD 1,820, increasing its daily gains to 7%. Multiple altcoins also turned green.

The inflation was expected to see a slower increase in July as petrol prices dropped across the country. However, it still remains close to 40-year highs.

"When we look at what really matters for the Fed, it's that core number, and year over year that did not come down for core CPI," says Victoria Fernandez. "There is a lot of data left before the next meeting. The next CPI number I think is going to be even more important." pic.twitter.com/j6mUJhxdkj

— Squawk Box (@SquawkCNBC) August 10, 2022

Ahead of the announcement, Mark Zandi, chief economist at Moody’s Analytics, opined that “everyone is primed for reasonably good news, so it’s got to be good news. If it’s not as good as people think, it’s going to be unusually bad news.” 

“I think the 9.1% inflation rate we suffered in June will be the peak…a lot of this depends on oil prices,” he added.

Also, per a July survey from the New York Federal Reserve, consumers expected inflation to run at a 6.2% pace over the next year and a 3.2% annual rate for the next three years – compared to 6.8% and 3.6%, respectively, seen in a June survey.

Meanwhile, Marcus Sotiriou, an analyst at the digital asset broker GlobalBlock, said in a comment shared with Cryptonews.com prior to the report that,

“CPI is expected to be 8.7% – if the released number is lower than this figure, I expect a rally for crypto and equities to ensue. I think any figure below 9.1% is promising though, as this was las month’s CPI figure, and it would signal the start of a plateau with inflation. In this case, the Federal Reserve [Fed] would be inclined to become less aggressive in its next [Federal Open Market Committee] meeting in September, which the market would be excited about.”

Investors are watching the CPI for clues as to how much the Fed might raise interest rates at its September meeting.

Meanwhile, the gap between two and 10-year Treasury yields, which is considered to be a reliable recession indicator, has grown to its largest in two decades,

“[E]quity markets look as if they believe the Fed is going to stop soon and start cutting in 2023. […] I think [CPI data] will suggest the Fed is not going to stop, which to me suggests weaker equity markets ahead which will limit any dip in the dollar in the next few months,” Mizuho senior economist Colin Asher was quoted as saying by Reuters.

Reactions:

Price increases over last year (CPI report)…
Fuel Oil: +75.6%
Gasoline: +44.0%
Gas Utilities: +30.5%
Electricity: +15.2%
Food at home: +13.1%
New Cars: +10.4%
Transportation: +9.2%
Overall CPI: +8.5%
Food away from home: 7.6%
Used Cars: +6.6%
Shelter: +5.7%
Medical Care: +5.1%

— Charlie Bilello (@charliebilello) August 10, 2022

USA CPI down to 8.5%, better than 8.7% expected and lower than last month's 9.1%.
Good news, you're losing purchasing power at a very slightly slower rate! Yay!
Positive market moves almost certain in short term, incl #bitcoin

— Jason Deane (@JasonADeane) August 10, 2022

FED SEEN RAISING INTEREST RATES BY 50 BPS IN SEPT, BASED ON FED FUNDS FUTURES PRICING, VERSUS 75 BPS HIKE SEEN BEFORE CPI REPORT

— *Walter Bloomberg (@DeItaone) August 10, 2022

US CPI comes in lower than expected (8.5% vs 9.1% YoY vs June, 0% MoM!! vs 1.3% in June). A great day to own gold, yen, the long bond, stocks and even bitcoin. A bad day for the dollar.

— Charlie Morris (@AtlasPulse) August 10, 2022

recession baby!

— wakawaka (@Real_Wakawaka) August 10, 2022

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Learn more: 
– Bad News is Good News: Bitcoin Plays With USD 24K as Traders Speculate on Fed Pivot and US Recession
– Global Economic Growth Slows Amid Gloomy and More Uncertain Outlook

– Soaring Inflation Puts Central Banks on a Difficult Journey
– Is the US in Recession? Depends on Whom You Ask

– Inflation Is 2022’s Boogeyman
– European Central Bank Raises Rates for the First Time in 11 Years