US Inflation Declines in July, and Prices of Bitcoin and Ethereum Rise

After reaching 9.1% in June, the US consumer price index (CPI) saw an annual increase of 8.5% in July, which is less than anticipated and points to an inflation peak and potential cooling.

According to economists surveyed by Bloomberg, inflation would rise by 0.2% from June to July this year, or 8.7% annually.

Additionally, the annual core CPI for July, which excludes prices for food and energy, was lower than expected (6.1%) and the same as in June (5.9%).

Following the announcement, the prices of bitcoin (BTC) and ethereum (ETH) both increased. BTC increased its daily gains to 3% (at 13:21 UTC) after rallying from USD 23,100 and briefly crossing USD 24,000, while ETH increased its daily gains to 7% by rising from USD 1,710 to USD 1,820. Several alternative coins also turned green.

Because gasoline prices nationwide decreased in July, it was anticipated that inflation would rise more slowly. It is still quite near to 40-year highs, though.

Mark Zandi, chief economist at Moody's Analytics, stated that "everyone is primed for pretty good news, therefore it's had to be good news" prior to the announcement. It's going to be extraordinarily bad news if it's not as good as people expect.

"I believe the peak in inflation will be the 9.1% rate we had in June...a lot of this hinges on oil prices," he continued.

Consumers predicted inflation to run at a 6.2% pace over the next year and a 3.2% annual rate for the next three years, according to a July survey from the New York Federal Reserve, as opposed to 6.8% and 3.6%, respectively, indicated in a June survey.

In the meantime, prior to the publication of the research, Marcus Sotiriou, an analyst at the digital asset broker GlobalBlock, stated in a statement shared with Cryptonews.com that,

"CPI is anticipated to be 8.7%; if the actual amount is less than this percentage, I anticipate a rise in cryptocurrencies and stocks. As this was the CPI statistic from the previous month and it would indicate the beginning of an inflation plateau, I believe any reading below 9.1% is encouraging. In this scenario, the Federal Reserve [Fed] might be tempted to tone down its hawkish stance at the FOMC meeting in September, which would delight the market.

Investors are keeping an eye on the CPI for hints as to how much the Fed might hike interest rates at its meeting in September.

The difference between two-year and 10-year Treasury yields, which is seen to be a reliable recession indicator, has increased to its greatest level in 20 years.

Equity markets appear to think that the Fed will soon stop raising interest rates and start decreasing rates in 2023. Colin Asher, senior economist at Mizuho, was reported by Reuters as stating, "I think [CPI data] will show the Fed is not going to halt, which to me suggests worse equity markets ahead and will restrict any decline in the dollar in the next several months.

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