The U.S. Consumer Price Index remained unchanged in May, outperforming economists’ expectations of a 0.1% rise and down from 0.3% in April. On a year-over-year basis, CPI increased by 3.3%, slightly lower than both the forecast and April’s reading of 3.4%.

The core CPI, excluding food and energy costs, rose 0.2% in May, better than the anticipated 0.3% rise and down from April’s 0.3%. Year-over-year, core CPI was up 3.4%, below the expected 3.5% and April’s 3.6%.

Bitcoin responded positively to the lower inflation reading, jumping to $69,400, an increase of nearly 4% over the past 24 hours.

After significant drops in inflation throughout 2022 and 2023 due to the Federal Reserve’s aggressive interest rate hikes, the decline had stalled at higher levels than the Fed’s 2% target, dampening market hopes for imminent rate cuts.

At the beginning of this year, traders anticipated five or six 25 basis point rate cuts in 2024 by December. This expectation had decreased to one or two cuts before today’s CPI report, with the first cut not expected until September, according to the CME FedWatch Tool.

Crypto prices have shown high sensitivity to U.S. economic data, noted K33 Research earlier this week. Rising inflation figures and reduced expectations for rate cuts caused Bitcoin to fall from its all-time high above $73,000 in March to below $57,000 in May. Traders believe that looser monetary policies will drive the next phase of the crypto rally to new record prices.

Contrary to U.S. trends, several major central banks worldwide, including the European Central Bank and the Bank of Canada, have begun lowering benchmark rates, pushing the U.S. dollar index to a one-month high.

Investors are also keenly awaiting the Federal Reserve’s “dot plot,” scheduled for release later today, which outlines the Federal Market Open Committee members’ interest rate projections and could significantly impact asset prices.

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