US CPI Inflation Slows for 10th Straight Month; How Does This Affect Bitcoin?
CPI Report Shows a Slight Slowdown in U.S. Inflation
On Wednesday, May 10th, the Bureau of Labor Statistics (BLS) released its Consumer Price Index (CPI) report, which showed that the U.S. inflation rate had slowed to 4.9% in April from 5.0% in March. This figure was slightly lower than the economists' forecast of 5.0%. The news of the slight slowdown in inflation caused the price of bitcoin (BTC) to rise over 1% to just above $28,000 in just a matter of minutes.
CPI Rises 0.4% in April
The report also showed that the CPI rose 0.4% in April, which was in line with expectations but higher than the 0.1% rise seen in March. The core CPI, which strips out food and energy costs, rose 0.4% in April, in line with expectations and the same as March's advance. The annual core CPI rate in April was 5.5%, which was slightly lower than economists' forecasts of 5.6%.
Possible Pause in Rate Increases
The Federal Open Market Committee (FOMC) of the U.S. Federal Reserve indicated at its last meeting in May that it is considering at least a pause in its historic run of rate increases. The central bank has taken the benchmark fed funds rate from about 0% in early 2022 to the current targeted range of 5.0%-5.25%. However, this fast pace of rate hikes has not succeeded in bringing inflation down to the Fed's 2% target. The central bank is also keeping a close eye on the growing troubles in the U.S. banking system, which have led to the failure of a number of regional lenders, most recently First Republic Bank.
Traders Bet on Easier Monetary Policy
For the moment, traders are betting that this very modest moderation in inflation might give the Fed room for easier monetary policy. The U.S. 10-year Treasury yield has declined seven basis points to 3.45% and the 2-year nine basis points to 3.94%.
How Does This Affect Bitcoin?
Bitcoin, like other cryptocurrencies, is often seen as a hedge against inflation. This is because it is decentralized and operates independently of traditional financial systems. As such, investors often turn to bitcoin as a way to protect their wealth in times of economic uncertainty or inflation. When the CPI report showed a slight slowdown in U.S. inflation, the price of bitcoin rose over 1%, indicating that investors believe that bitcoin may still be a viable hedge against inflation.
To conclude, the CPI report released on May 10th showed a slight slowdown in U.S. inflation. This news caused the price of bitcoin to rise over 1%, as investors continue to turn to cryptocurrencies as a potential hedge against inflation. As the U.S. Federal Reserve considers pausing its rate increases, it will be interesting to see how this affects the price of bitcoin and other cryptocurrencies moving forward.
