The latest Consumer Price Index (CPI) has revealed an inflation rate of 2.9%, which is significantly higher than market expectations. This positive development has raised hopes for possible interest rate cuts, which in turn has created an optimistic sentiment in the crypto market. As a result, the Bitcoin price broke its immediate consolidation.

Inflation has fallen below 3% since March 2021

In the US, the consumer price index (CPI), which tracks inflation, fell to 2.9 percent in July from 3 percent in June, according to a report from the US Bureau of Labor Statistics (BLS) on Wednesday. This figure was below experts’ forecasts.

The core CPI, which excludes the often volatile costs of food and energy, rose 3.2 percent. This followed a 3.3 percent increase in July and was exactly in line with analysts’ expectations. Both the headline CPI and the core CPI rose 0.2 percent on a monthly basis.

The information was released a day after the producer price index, which eased investor concerns as it pointed to a slowdown in inflation at the production level.

With the next Federal Reserve meeting in about a month, traders are desperately trying to predict the direction of interest rates, especially after disappointing jobs numbers. Before today’s data release, the debate over whether the Federal Reserve would cut its benchmark interest rate at the next meeting seemed to be settled.

According to CME FedWatch, which calculates probabilities based on market positions on short-term interest rates, there was no chance that the rate would stay at the current 5.25 to 5.50 percent. In fact, the tool showed a 52.5 percent probability of a 50 basis point rate cut, compared to a 47.5 percent probability of a 25 basis point cut.

The slightly better-than-expected inflation reports likely confirm that the Fed will cut interest rates at its September meeting – the first cut in 4.5 years. Such a move is likely to provide a boost to equity and crypto markets.

This is the first time since March 2021 that inflation has fallen below 3%.

Bitcoin price rises to $62,000

Following the positive CPI report, the cryptocurrency market saw a rebound, with Bitcoin price reaching around $61,800, recovering some of its losses from early August. In the past 24 hours, Bitcoin is up more than 3.5%, outperforming the overall crypto market gain of just over 2.2%. However, BTC has faced downward volatility in the past few minutes, consolidating at around $61,000.

Experts believe that a higher consumer price index increases the pressure on cryptocurrencies. Rapid and significant fluctuations in the consumer price index are often an indicator of volatility in the crypto market. However, the recent decline in inflation could reduce volatility in crypto assets, allowing investors to invest heavily in Bitcoin.

Next on the US economic calendar are initial jobless claims and retail sales tomorrow. Also before the end of August is the Federal Reserve’s Jackson Hole symposium. In the past, former Fed chairmen have sometimes used this conference to announce or hint at significant policy changes.