While headline inflation came in faster than expected in December, investors are currently in buying mode following an unexpected year-on-year decline in core interest rates.
The closely watched consumer price index (CPI) rose 0.4% in December, slightly higher than analysts’ consensus and the previous month’s 0.3%. On an annual basis, the CPI rose 2.9%, compared with analysts’ forecasts of 2.9% and last month’s reading of 2.7%.
Core CPI, which excludes food and energy costs, rose 0.2% in December, compared with expectations for 0.2% and the previous month’s figure of 0.3%. However, core CPI fell to 3.2% year-on-year against forecasts of 3.3% and the November interest rate of 3.3%.
The pace of core inflation is of significant importance to policymakers, who have expressed at least a modicum of frustration at its stickiness above 3% as headline inflation fell at a much faster pace.
The price of bitcoin (BTC) rose about $1,500 in the minutes following the report to $98,500 after the report, up 2% over the past 24 hours, CoinDesk data shows.
In traditional markets, US stock index futures rose about 0.5% after the data, while bond yields and the dollar both fell sharply.
Crypto markets have traded in ranges through January on the back of macroeconomic data and monetary policy expectations amid a strong economy and concerns about sticky inflation. Bitcoin mostly consolidated below $100,000 since Federal Reserve Chairman Jerome Powell’s hawkish comments in December. That, along with a slew of stronger-than-expected economic and inflation data, led market participants to all but erase any interest rate cut expectations this year.
Most recently, Tuesday’s producer price index (PPI) for December showed cooler-than-expected inflation, supporting BTC’s rally to $97,000 after the sharp sell-off below $90,000 earlier in the week.
