3 - 5 minute read
The U.S. Consumer Price Index (CPI) for May rose by just 0.1%, which was softer than expected. This is in contrast to the 0.4% increase in April, and the economist forecasts of a 0.2% rise. On a year-over-year basis, the CPI slowed to 4.0% in May compared to 4.9% in April, and market forecasts for 4.1%. The core CPI, which removes volatile items like food and energy costs, was in line with expectations, increasing by 0.4% in May versus 0.4% in April, and market forecasts for 0.4%. However, core CPI slowed to 5.3% on a year-over-year basis compared to 5.5% in April and the expected 5.3%.
The news of inflation comes one day before the results of the U.S. Federal Reserve’s monetary policy meeting. Prior to the release of the CPI figures, the market had priced in a 76% chance that the Fed would pause on the rate hikes that have been ongoing since March 2022. However, in the minutes following the report, the chance of a pause increased to 79%.
The price of Bitcoin (BTC) rose just under 1% to $26,375 in the minutes following the report. This news has implications for traders, as it influences the market’s expectations of future rate hikes by the Fed.
According to an article on Forbes, the implications of the softer-than-expected CPI figures are complex. On the one hand, the figures suggest that inflation may not be as much of a concern as previously thought. However, on the other hand, the figures also suggest that the Fed may not need to be as aggressive in its rate hikes as previously anticipated. This could potentially lead to a drop in the value of the U.S. dollar and a rise in asset prices, including Bitcoin.
The article quotes Peter Schiff, CEO of Euro Pacific Capital, who suggests that the Fed may be forced to reverse its monetary policy due to rising inflation and a weakening dollar. Schiff states, “The Fed is going to have to raise rates faster and higher than they want to, which is going to cause the stock market to fall, the real estate market to fall, and the economy to go into recession.” Schiff’s comments highlight the potential risks for traders who are heavily invested in the stock market and real estate market.
In conclusion, the softer-than-expected CPI figures have implications for the future market moves, particularly in regards to the Fed’s rate hikes. The rise in Bitcoin prices following the report suggests that traders are paying attention to these implications. Traders should be aware of the potential risks and opportunities that come with the Fed’s monetary policy decisions and adjust their investment strategies accordingly.
The Bottom Line: The softer-than-expected CPI figures suggest that inflation may not be as much of a concern as previously thought, but it also means that the Fed may not need to be as aggressive in its rate hikes. This could lead to a drop in the value of the U.S. dollar and a rise in asset prices, including Bitcoin. Traders should be aware of the potential risks and opportunities that come with the Fed’s monetary policy decisions and adjust their investment strategies accordingly.
