Bitcoin Surges on Cooler Inflation Data, Fed Decision Looms

U.S. inflation showed signs of cooling in May, with the Consumer Price Index (CPI) coming in flat compared to forecasts of a slight increase. This positive news sent shockwaves through the cryptocurrency market, particularly Bitcoin (BTC), which jumped nearly 4% to $69,400 in the last day.

Inflation Eases, Rate Cut Hopes Rekindled:

The lower-than-expected inflation numbers suggest progress in the Federal Reserve’s fight against inflation. This could lead to a shift in their monetary policy, potentially paving the way for interest rate cuts later this year.

Earlier this year, markets anticipated several rate cuts in 2024. However, recent high inflation readings dampened those expectations. Today’s report reignited hopes for a potential September rate cut, according to the CME FedWatch Tool.

Crypto Market Responds Positively:

Cryptocurrencies have been highly sensitive to U.S. economic data, especially interest rates. The recent inflation worries had caused Bitcoin to plunge from its highs above $73,000 in March to below $57,000 in May. Investors believe looser monetary policy could fuel another cryptocurrency rally.

Global Central Banks Diverge:

While the U.S. Fed is still considering rate cuts, some central banks worldwide have already started lowering rates. This difference in approach contributed to a recent rise in the U.S. dollar index.

Focus on the Fed’s Decision:

Investors are now eagerly awaiting the release of the Federal Market Open Committee’s (FOMC) “dot plot,” which outlines members’ projections for future interest rates. This could significantly impact asset prices, including Bitcoin.