The Consumer Price Index rose 0.2% in July from June, in line with economists’ forecasts and the same as the monthly growth in June. On a year-over-year basis, CPI rose 3.2%, compared with forecasts of 3.3% and June’s figure of 3.0%.
Core CPI — which strips out volatile food and energy costs — also rose 0.2% in July, the same as forecasts and as June’s increase. Core CPI in July rose 4.7% from a year earlier, versus a 4.8% forecast and 4.8% in June.
The price of bitcoin (BTC) was little changed in the minutes following the U.S. government’s report at $29,550.
The figures may have increased the chances the Federal Reserve won’t raise interest rates at its next meeting in September. Prior to Thursday’s CPI release, the CME FedWatch tool showed traders had priced in just a 15.5% chance of a rate hike next month. In the immediate aftermath of the report, those odds sank to 10%.
The Fed has been tightening monetary policy since early last year to combat galloping inflation, raising its benchmark fed-funds rate target more than 500 basis points over the past 17 months to the current range of 5.25% to 5.50%.
The surge in interest rates played at least a part in bitcoin’s tumble from more than $69,000 in late 2021 to just above $16,000 at the end of 2022. Continuing rate worries this year are likely a factor in capping bitcoin’s bounce. To the extent that the latest CPI report confirms expectations that the Fed may back off of rate hikes, it could be bullish at the margin for bitcoin.
As measured by the CPI, annual inflation topped out at 9.1% in June 2022 and has mostly steadily declined since. The core rate peaked at 6.5% in March 2022 and has dropped as well, though not as dramatically as the headline number. The Fed’s target rate for inflation is 2%, but members of the central bank have indicated multiple times that they don’t need to see that figure before deciding to end the monetary tightening cycle.
