The US Consumer Price Index (CPI) came in today at 4.9 percent for April, while it was expected for a score of 5.0. This means that this indicator has decreased by 0.1 percent compared to March, which means that inflation has fallen more than originally expected.
Bitcoin’s price rose by several percent almost immediately after this news, and that means the Federal Reserve will likely take a break in June.
What does it mean?
By pausing the Federal Reserve, we mean that the US central bank has stopped raising interest rates. They initially did this to deal with the problem of inflation and today’s numbers suggest that they are slowly winning that war.
Raising interest rates is not good for financial markets because it makes it more expensive to borrow capital. Ultimately, this affects the economy and, by extension, people’s ability to invest.
In addition, a higher interest rate means that you receive a higher return on things like government bonds. The yield on US government bonds is now – depending on the term – sometimes more than 5 percent annually.
Of course, this makes investing in such products increasingly attractive compared to the uncertain returns of things like Bitcoin and stocks. Meanwhile, inflation has begun to ease, which has reduced the likelihood of a rate hike from the Federal Reserve, which is good news for bitcoin.
High probability of breakage
The cool thing is that you are on futures markets You can see what experts think is the chance of a new interest rate hike. At the time of writing, the probability of another rate hike at the next Fed rate meeting on June 14 has decreased from 25 to 14.2 percent due to positive inflation data.
Right now, the probability of a Fed rate stop is 85.8%. The futures markets are usually not far away. Certainly not when it comes to such compelling proportions.
Only if next month’s inflation data disappoints and is slightly higher than expected is there a chance the Fed will raise interest rates after all. However, for the time being, this chance seems small and we can probably prepare for a breakout, for the Bitcoin price to bounce back.
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