July’s CPI data shows inflation slowing to 2.9%, the lowest in over three years

The Consumer Price Index increased 0.2% on a seasonally adjusted basis, after declining 0.1% in June, according to the U.S. Bureau of Labor Statistics. Over the last 12 months, the index increased 2.9% before seasonal adjustment, which came in slightly below the 3% rise economists predicted.

Higher housing costs mostly drove the rise. When excluding food and energy, the core CPI increased by 0.2% monthly and 3.2% annually, which met expectations.

The annual rate is the lowest since March 2021 and the core rate is the lowest since April 2021, according to the Bureau of Labor Statistics.

Effects on crypto

"BTC has fallen almost 1% since the inflation report came out this morning as the core inflation print above 3% means the Fed doesn’t yet have the all clear signal to start cutting rates, which is the catalyst BTC is looking for," Juan Leon, senior investment strategist at Bitwise, said in a post on X.

At publication time, the price of bitcoin traded around $59, 276 according to The Block's BTC price page.

"A dovish shift in monetary policy is bullish for risk assets like Bitcoin," Bitfinex analysts said in a statement. "With inflation concerns easing, the market could see a surge in liquidity as investors anticipate lower interest rates, which generally makes speculative assets more attractive."

The analysts said Bitcoin is likely to experience upward momentum as the prospect of a rate cut becomes more tangible. The key resistance level between $64,000 and $65,000 could be tested, they said.

Most economists expect at least a 25-basis-point cut to interest rates at the Fed's next meeting in September. At their last meeting, the Fed held rates steady at 5.25% to 5.5%.

"Apart from core inflation, labor market data will be will be important for BTC going forward as continued weakness there would give more ammo for the Fed to begin cutting in Sept," Leon added.