The US inflation rate slowed down in July, according to the latest data released by the Labor Department on Friday. The Consumer Price Index (CPI), which measures the change in the prices of a basket of goods and services, rose by 0.2% in July, compared to 0.9% in June. The annual inflation rate dropped from 5.4% in June to 5.3% in July, slightly lower than the expected 5.4%.
The core CPI, which excludes food and energy prices, also moderated in July, rising by 0.1%, compared to 0.9% in June. The annual core inflation rate fell from 4.5% in June to 4.3% in July, lower than the expected 4.4%.
The slowdown in inflation was mainly driven by a decline in the prices of used cars and trucks, which fell by 0.2% in July, after surging by 10.5% in June. Other categories that saw lower price increases or decreases in July included airline fares, apparel, motor vehicle insurance, and household furnishings.
The inflation data eased some of the pressure on the Federal Reserve to tighten its monetary policy sooner than expected. The Fed has maintained that the recent spike in inflation is transitory and largely driven by supply bottlenecks and base effects from the pandemic. The Fed has also signaled that it will start tapering its $120 billion monthly bond purchases later this year, but it has not given a clear timeline or criteria for doing so.
Crypto market rallies as investors see lower risk of Fed tightening
The crypto market rallied as investors saw lower risk of Fed tightening and higher demand for alternative assets amid inflation uncertainty. Bitcoin, the largest cryptocurrency by market capitalization, rose by 3.7% in the last 24 hours to $46,892 as of 6:30 a.m. ET on Saturday, according to CoinMarketCap data. Bitcoin reached a high of $47,444 on Friday, its highest level since May 16.
Ether, the second-largest cryptocurrency by market cap, also gained 3.7% in the last 24 hours to $3,263 as of 6:30 a.m. ET on Saturday. Ether hit a high of $3,316 on Friday, its highest level since May 19.
Other major cryptocurrencies also posted gains in the last 24 hours, such as Cardano (up 6%), Binance Coin (up 4%), XRP (up 3%), and Dogecoin (up 2%). The total crypto market cap increased by 3.8% to $2.07 trillion as of 6:30 a.m. ET on Saturday.
Analysts said that the crypto market was benefiting from the positive sentiment and liquidity in the global financial markets, as well as the growing adoption and innovation in the crypto space.
“The crypto market is reacting positively to the US inflation data, as it reduces the likelihood of an aggressive Fed tapering that could hurt risk appetite and liquidity,” said Jason Lau, chief operating officer at San Francisco-based crypto exchange OKCoin. “Crypto investors are also optimistic about the long-term prospects of the industry, as we see more adoption and innovation from both institutional and retail players.”
Lau added that some of the factors that could support the crypto market growth in the coming months include:
- The launch of Ethereum’s London hard fork, which introduced a fee-burning mechanism that could make Ether more scarce and valuable over time.
- The anticipation of Cardano’s Alonzo upgrade, which will enable smart contracts and decentralized applications on its network.
- The expansion of decentralized finance (DeFi) and non-fungible tokens (NFTs), which offer new use cases and opportunities for crypto users and creators.
- The regulatory clarity and guidance from various jurisdictions, such as the US Securities and Exchange Commission (SEC), which could foster more confidence and compliance in the crypto space.
