Bitcoin (BTC) bulls are eagerly awaiting the July Consumer Price Index (CPI) report from the Bureau of Labor Statistics, hoping for good news on the U.S. inflation front. Economists predict a 0.2% monthly increase, the same as June, and a 3.3% year-over-year growth, up from 3% in June. Core CPI (excluding food and energy costs) is expected to rise 0.2%, with the annual rate slipping to 4.7% from 4.8%.
The U.S. Federal Reserve began a series of rate hikes early last year in an effort to tame galloping inflation, raising the fed funds target range from 0% to 0.25% to the current 5.25%-5.50%. This tightening was a factor in the big decline of Bitcoin, which dropped from above $69,000 in 2021 to around $16,000 at the end of 2022.
The cryptocurrency has since recovered by 75%, trading just below $29,000, but is still off roughly 58% from its all-time high. The slowing and potential end of Fed tightening has been seen as a factor in Bitcoin’s modest recovery.
While Thursday’s CPI data may reinforce this idea, short-term interest rate traders have already priced in no more rate hikes from the Fed this year. In fact, traders are already anticipating rate cuts from the U.S. central bank in 2024.
A negative surprise from the CPI report – i.e., higher than expected inflation – could send Bitcoin lower on worry that interest rates will go even higher.