US CPI data has been released, showing inflation rose in May for the first time since February. Bitcoin reacted to this news, continuously approaching the $110,000 level. In addition to CPI, traders and investors will also be monitoring US employment data and PPI (Producer Price Index), expected to be released on Thursday.
Inflation Rose to 2.4% in May, US CPI Data Shows
The US Bureau of Labor Statistics (BLS) has released the Consumer Price Index (CPI), showing inflation rising at an annual rate of 2.4% in May, after a 2.3% year-on-year (YoY) increase in April. For the first time since January 2025, core CPI inflation has increased.
This is the first time CPI has increased in 3-4 months. Soon after, Bitcoin recorded a modest increase, rising to $110,000 at the time of writing.
Before the US CPI data is released, the headline index is expected to rise 0.2% month-over-month (MoM) and accelerate to 2.5% year-over-year (YoY). Perhaps, the rising inflation expectations explain the modest surge in Bitcoin prices, as this impact has been reflected in the price.
"If CPI > 2.5%, expect a sell-off as the likelihood of the Fed cutting rates will be lower. If CPI = 2.5%, a sell-off will occur but the drop will be a buying opportunity. If CPI < 2.5%, expect a pump and dump but the market will close in the green. Except for the first scenario, the market will be bullish," analyst Cas Abbé predicted.
Notably, some banks expect May CPI to show mild overall inflation and monthly core inflation close to the average of the past 12 months.
Meanwhile, it is easy to identify the reason for the increase in US CPI inflation data in May. All signs point to Trump's tariffs, with the latest data showing the initial impact of trade policies in the US, especially on goods inflation.
Analyst Daan Crypto Trades wrote: "A slight increase from last month is anticipated, possibly due to rising OIL prices and some taxes applied to consumers."
With CPI inflation data factored into prices, attention will turn to additional US indicators this week, specifically initial jobless claims and PPI, expected to be released tomorrow, June 12. Additionally, attention will also focus on the Federal Reserve's policy decision next week.
Next Wednesday, the Fed will announce its interest rate decision for policymakers at the June 17-18 meeting, followed by a speech from Chairman Jerome Powell.
US CPI is a lagging indicator, making it a key focus for inflation targeting and therefore tied to the Federal Reserve's 2% target. Today's US CPI inflation data will influence the FOMC's interest rate decision next week.
According to the CME FedWatchTool, there is a 99.9% chance the Fed will keep interest rates steady at 4.25-4.50% in the next meeting. Currently, this means the likelihood of the Fed cutting rates is nearly 0%.
The Kobeissi Letter reported: "The likelihood of the Fed cutting interest rates next week has dropped to 0%."
However, despite the observed impact from Trump's tariffs on US inflation, Powell's stance is that political pressure will not affect the Fed's policy decisions.
With inflation still rising above the Fed's 2% target, policymakers are likely to continue a cautious approach.
Analysts from Bitunix shared with BeInCrypto that: "Overall, the market expects the Federal Reserve to continue a wait-and-see approach... market developments will still depend on events, with key factors being the adjustment of interest rate cut expectations after the Federal Reserve's meeting and statements from officials."
However, beyond inflation, the labor market is also becoming a fundamental macroeconomic catalyst for Bitcoin. The Fed may only need a resilient labor market and an economy that has not derailed so far to cut interest rates.