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Yesterday, US CPI data, which the Fed closely monitors when making its interest rate decisions, was released and came in at 4.2%.
At this point, inflation in the US has officially risen above 4%, more than double the Fed’s ultimate target of 2%. This increases the likelihood of further Fed interest rate hikes.
With rising oil prices due to the ongoing US-Iran war, inflation is expected to climb further, and according to JPMorgan, May’s CPI data may be near the peak of the inflation cycle.
JPMorgan Chase analyzed that the US May Consumer Price Index is approaching the peak of the current inflation cycle.
At this point, David Kelly, Chief Global Strategist at JPMorgan Asset Management, stated that the Fed is likely to keep interest rates unchanged at its next meeting to monitor the data. However, Kelly added that the market still seems to be pricing in the possibility of an interest rate hike later in the year.
The JPMorgan strategist concluded that the market is currently divided between expectations of a peak in inflation and the possibility of hawkish monetary policy, and that the Fed’s future decisions will depend on energy prices and core CPI trends.
How Will Rising US CPI Data Affect Bitcoin?
When evaluating the impact of rising CPI rates on Bitcoin, one analyst stated that the 4.2% CPI level in the US is putting downward pressure on $BTC.
Markus Thielen, founder of 10x Research, stated that the recently released CPI data was insufficient to alleviate inflation concerns and was not seen as a signal among institutional investors to increase their Bitcoin positions.
At this point, Thielen argues that if the CPI data remains at a high level, it could create additional downward pressure on Bitcoin.
The report notes that geopolitical risks stemming from a US-Iran war and rising oil prices could increase inflationary pressure and raise the likelihood of the $BTC price falling below $60,000 in the short term.
Theo’s Chief Investment Officer (CIO), Iggy Ioppe, commented, “These CPI results will cause the Fed to remain cautious. These figures are unlikely to act as a significant bullish catalyst for Bitcoin.”
Tim Sun, a senior analyst at HashKey Group, assessed that despite rising market expectations, a real interest rate hike this year is unlikely. Sun said, “It’s unlikely the Fed will actually raise interest rates this year. Preference for risk assets like Bitcoin will only fully recover when inflation slows and interest rate cuts become possible.”
*This is not investment advice.