U.S. CPI Was Flat in May, Beating Expectations; Bitcoin Rises to $69.2K

As an analyst, I would rephrase that statement as follows: The Consumer Price Index (CPI) increased by 3.3% year over year, which is slightly lower than the anticipated analyst forecasts and a decrease from the previous month’s CPI growth rate of 3.4%.

In May, the central Consumer Price Index, with food and energy expenses excluded, increased by 0.2 percent, surpassing predictions of a 0.3 percent rise and following a 0.3 percent growth in the previous month. Contrastingly, analysts had anticipated a yearly increase of 3.5 percent for core CPI, but it only advanced by 3.4 percent compared to the prior year’s 3.6 percent.

As a researcher studying economic trends, I’ve noticed that inflation readings significantly decreased in 2022 and 2023 following the Federal Reserve’s decision to increase interest rates. However, this downward trend came to a halt in recent months as inflation levels remained persistently higher than the 2% target set by policymakers. Consequently, market participants’ anticipation of interest rate reductions has been dampened due to these stubbornly high inflation figures.

This year, traders initially expected the Federal Reserve to make between five and six quarter-point reductions in interest rates by the end of December. However, following the latest Consumer Price Index (CPI) report, that number has been scaled down to one or two cuts, with the first reduction not taking place until September according to the CME FedWatch Tool.

Crypto prices have been significantly reacting to the latest US economic data releases. According to a report by K33 Research this week, the more recent inflation data showing higher figures and reduced expectations for interest rate cuts led to bitcoin’s price drop from its all-time high of over $73,000 in March down to below $57,000 in May. However, traders believe that easier monetary policies will drive the next surge in crypto prices towards new record levels.

In contrast to the U.S.’s anticipation, multiple significant central banks around the world have recently reduced their benchmark interest rates. The European Central Bank and Bank of Canada made these cuts last week. This action drove the U.S. Dollar Index (DXY) up to a one-month peak.

As a researcher studying financial markets, I would advise investors to pay close attention to the “dot plot” publication by the Federal Reserve later today. This chart represents the individual projections of Federal Open Market Committee members regarding future interest rates. Any shifts or changes in these projections could significantly impact asset prices.