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US Headline CPI Matches Forecast, Core CPI Exceeds It
The US headline Consumer Price Index (CPI), a critical metric for assessing the country’s inflation rate, met expectations at 0.2% month-over-month (MoM) and 2.5% year-over-year (YoY) for August 2024. However, the core CPI (MoM) exceeded forecasts, coming in at 0.3% compared to the anticipated 0.2%.
For those unfamiliar, the headline CPI includes a broad range of categories such as housing, transportation, services, medical care, food, and energy. In contrast, the core CPI excludes food and energy prices, providing a more stable view of underlying inflation trends. By omitting the prices of volatile items, core CPI is often considered a more accurate measure of long-term inflation.
Following the unexpected core CPI print, Bitcoin (BTC) experienced a quick decline, falling from around $57,000 to $56,168 at the time of writing. The broader cryptocurrency market mirrored this trend, with Ethereum (ETH), Binance Coin (BNB), Solana (SOL), and Ripple (XRP) also seeing declines of 2.1%, 1.3%, 4.6%, and 2.4%, respectively.
With the latest CPI data for August 2024 now released, it seems increasingly likely that the US Federal Reserve (Fed) will commence its rate-cut cycle with a 25 basis points (bps) cut in September. Paul Ashworth from Capital Economics noted:
On balance, we still think the Fed will begin its rate-cutting cycle with a more modest 25 bps cut. The 3.2% annual core CPI was mostly due to a 5.2% increase in shelter prices, while the three-month annualized core CPI rebounded only to 2.1% from a weak 1.6%.
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Following the CPI data release, the probability of the Fed slashing rates by 25 bps next week has surged to 83%, according to CME FedWatch. Should the Fed reduce rates by 25 bps, it is anticipated to boost confidence in both crypto and stock markets, as a more significant 50 bps cut could signal the Fed’s lack of confidence in managing inflation.
What Lies Ahead For Bitcoin?
Bitcoin (BTC) remains range-bound between $52,000 and $70,000 on the daily chart, leading analysts to speculate on its future trajectory. Some believe BTC’s current price action mirrors a similar consolidation phase in 2023, suggesting the possibility of a new all-time-high (ATH) if the trend continues in 2024.
The upcoming US Presidential Elections in November 2024 could also influence BTC’s price. Some analysts, regardless of the election outcome, maintain that Bitcoin is poised for long-term success.
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At the time of writing, Bitcoin trades at $56,168, while the total cryptocurrency market capitalization stands at $1.94 trillion, down 2.3% in the past 24 hours.
