• The U.S. Bureau of Labor Statistics released a lower-than-expected Consumer Price Index reading of 7.1%, the lowest since December 2021.
• Bitcoin, viewed as risk-on in traditional markets, has experienced a 5% jump to nearly $18,000 in response.
• This reading leads into a FOMC meeting this week, which will yield a decision and projections for the 2023 economic outlook.
The U.S. Bureau of Labor Statistics released a lower-than-expected Consumer Price Index (CPI) reading of 7.1%, the lowest since December 2021. This news has caused the price of Bitcoin (BTC) to jump approximately 5%, reaching nearly $18,000. The CPI is a measure of inflation, and the lower than expected reading reflects the Federal Reserve’s aggressive rate hikes to prevent runaway inflation. Additionally, the report indicated that food and energy prices remain high at 10.6% and 13.1%, respectively.
The price of Bitcoin, which is often viewed as risk-on in traditional markets, benefits from low rate environments. Investors have responded positively to the news, and the lower CPI reading reinforces the idea that the Fed will slow down rate hikes, which could explain the current pump in Bitcoin’s price. Bitcoin began its descent from the mid-$40,000 range in April of 2022 following the failure of the Three Arrows Capital hedge fund, and has since been exacerbated by the collapse of industry titan FTX.
The news of the lower CPI reading leads into the Federal Open Market Committee’s (FOMC) meeting this week. The meeting is expected to yield a decision on Wednesday, as well as projections for key economic indicators looking forward into 2023. The FOMC is the policy-making arm of the Federal Reserve System, and their decision will be closely watched as it could greatly impact the trajectory of the economy.
As investors eagerly await the outcome of the FOMC meeting, the lower CPI reading has already caused a positive reaction in the markets and could potentially be seen as a sign of economic recovery. While the future of Bitcoin remains uncertain, the current pump in its price serves as a reminder of its potential for quick gains in response to macroeconomic events.