Cryptocurrencies Bitcoin and Ethereum Maintain Stability Amid 2.9% Decrease in Inflation

Bitcoin’s price remained steady on Wednesday following the release of the latest inflation data, which showed a milder increase than anticipated. The Consumer Price Index (CPI) rose by 2.9% over the past 12 months, slightly below economists’ expectations of a 3% rise. Additionally, monthly consumer prices saw a 0.2% uptick compared to June, reversing a decline seen the previous month.

After the release of the CPI report, Bitcoin was trading around $61,200, registering a 3.9% gain in the past 24 hours. Ethereum and Solana also saw price increases of 3.9% and 3.8%, reaching $2,740 and $151, respectively.

The latest inflation figures are aligning more closely with the Federal Reserve’s 2% target, signaling a potential easing of monetary policy in the near future. Inflation has notably decelerated since hitting 9.1% in June 2022, with July’s reading marking the lowest level since March 2021.

Market sentiment suggests that the Fed may cut interest rates in September, with traders speculating on the magnitude of the rate cut. There is a 50% probability, as per the CME FedWatch Tool, of the Fed opting for a 50 basis points rate reduction rather than the conventional quarter-percentage-point cut.

Concerns over a possible recession were briefly sparked earlier this month due to weaker-than-expected job growth figures, causing Bitcoin to dip below $50,000. However, positive data on U.S. service jobs helped alleviate some of these fears. Recent Purchasing Managers’ Index (PMI) data indicates a more robust U.S. economy than previously anticipated, offering a less bleak outlook compared to earlier forecasts.

As the Fed deliberates on its impending rate cut decision, policymakers face a delicate balancing act. Acting too swiftly could reignite inflation, while delaying the rate cut could push the economy towards a recession. Before making any definitive moves, the Fed will await the release of the Personal Consumption Expenditures data on August 30.

The evolving economic landscape, coupled with market dynamics, will continue to shape the trajectory of cryptocurrencies like Bitcoin and Ethereum as investors monitor the unfolding macroeconomic developments closely.