Bitcoin reclaimed the $63,000 mark after new U.S. inflation data showed consumer prices rising at a slower pace than anticipated. The June Consumer Price Index (CPI) came in well below expectations, signaling a potential easing in inflationary pressures and reducing market fears of aggressive Federal Reserve tightening in the near term.
The U.S. Bureau of Labor Statistics reported that the CPI increased by 3.5% year-over-year in June, undercutting forecasts of 3.8%. On a monthly basis, the index actually fell by 0.4%, a steeper drop than the 0.1% decline analysts had predicted. Core CPI, which excludes volatile food and energy costs and often guides Fed policy, also showed a moderated increase of 2.6% year-over-year and no monthly change, both figures trailing analyst estimates.
These inflation readings represent a marked slowdown from May, when CPI and core CPI measured 4.2% and 2.9% respectively, suggesting underlying price pressures might be easing despite ongoing geopolitical tensions in the Middle East. Bitcoin’s price notably responded, climbing more than 2% from intraday lows just below $62,000 amid earlier concerns triggered by escalations in the U.S.-Iran conflict and new trade proposals impacting the Strait of Hormuz.
The softer inflation numbers sharply reduced expectations for a Federal Reserve rate increase at the upcoming July policy meeting. Data from the CME FedWatch tool showed the probability of a July hike falling to just over 16%. Similarly, market odds for any rate hikes within this year dropped to around 55% from previous highs, according to Polymarket, a leading crypto prediction market platform.
Investors are now focused on the upcoming congressional testimony by Federal Reserve Chair Kevin Warsh for cues on monetary policy direction. Additionally, potential volatility looms ahead of the Producer Price Index (PPI) inflation release, as well as the broader uncertainties stemming from renewed tensions in the Middle East. Proposed U.S. tariffs aimed at shipping through the Strait of Hormuz present further risks to global oil supplies and market stability.