2.5% US Headline Inflation in August

The US Bureau of Labor Statistics (BLS) just released its latest Consumer Price Index (CPI) report covering the past 12 months leading to the end of August this year.

The US Bureau of Labor Statistics (BLS) released its latest Consumer Price Index (CPI) report on Tuesday, revealing that headline inflation has slowed to 2.5% over the year. This marks a significant improvement from July’s 2.9% and the lowest since 2021.

The latest numbers also came in slightly lower than analysts’ expectations of 2.6%. Meanwhile, core inflation, which excludes the volatile prices of goods like food and energy, sat at 3.2%.

The highest increase in the August report was in the transportation services sector at 7.9% year-on-year. Meanwhile, fuel oil prices fell by 12.1% within the same period, displaying the highest drop in the report.

The latest development sets the tone for the much-anticipated interest rate cut at the upcoming Federal Open Market Committee (FOMC) meeting on September 17 to 18.

Interest Rate Cut Expectation

For more than a year, the US Federal Reserve has maintained interest rates at 5.25%- 5.5%. Fed Chair Jerome Powell has made it clear that they won’t adjust the figures down until they have “greater confidence that inflation is moving sustainably toward 2%.”

However, when inflation indicated signs of slowing down last month at less than 3%, Powell eventually softened his tough stance on the subject. During a speech at the Jackson Hole event last month, he stated that “the time has come” for the central bank to lower its rates.

According to Reuters, interest rate futures contracts priced a 25% chance that the Fed will cut interest rates by a half-percentage-point next week. Rate markets have priced the cuts at more than 100 basis points (bps) for 2024.

Some economists firmly believe that the 25 bps cut would occur as early as the next FOMC meeting.

Effect on Bitcoin

Although there was a sigh of relief in the latest employment data, experts like Stephen Stanley, Santander’s chief US economist, called the data “soft but not disastrous.” This further strengthens the likelihood of a 25 bps cut.

However, QCP Capital does not see the latest CPI data to significantly impact Bitcoin (BTC) due to investors’ concerns centering on the unemployment data. This may sufficiently explain why the latest CPI report failed to yield key price actions in the crypto asset as of 3:00 PM UTC this Wednesday.

Despite the anticipation of interest rate cuts in the US, BTC sluggishly moved between a $55,567.34 low and a $58,029.98 high before settling with an over 1% loss on the 24-hour chart at $56.4K this hour.