U.S. CPI inflation slows to 3.4% as expected, bitcoin holds near $64,000

Headline CPI rose 0.1% month over month and 3.4% year over year in July.

Core CPI increased 0.2% monthly and 2.5% annually, both matching forecasts. Bitcoin held near $64,000 following the report.

U.S. inflation in July was in line with expectations, leaving expectations for another Federal Reserve rate hike broadly unchanged. The Consumer Price Index (CPI) rose 0.1% in July from the previous month, compared with economists’ forecast for a 0.1% increase and June’s 0.4% decline. On a year-over-year basis, CPI rose 3.4%, in line with forecasts and slightly lower than June’s 3.5% reading.

Core CPI, which excludes food and energy, rose 0.2% month over month in July, compared with forecasts for a 0.2% increase and an unchanged reading in June. On a year-over-year basis, core CPI rose 2.5% as expected by analysts and edging lower from June’s 2.6%. Bitcoin BTC$63,346.66 fell from $64,400 to $64,080 in a knee-jerk reaction before stabilizing, still largely flat over 24 hours.

Nasdaq 100 futures traded 0.7% higher. Treasury yields remained under pressure, maintaining pre-CPI weakness. The two-year hovered at 4.19%, down 3.6 basis points on the day, and the 10-year yield stood at 4.66%, also down three basis points.

Already a key data point for markets, July’s CPI report took on added importance after a weaker-than-expected U.S. employment report showed that the economy unexpectedly shed 23,000 jobs in July.

“The absence of an upside inflation surprise removes one of the biggest immediate threats to risk assets, but the report probably isn't soft enough on its own to trigger a major dovish repricing,” said Daniela Hathorn, senior market analyst at Capital.com.

Market participants are now pricing in a 44% probability that the Federal Reserve would hike interest rates at its upcoming September meeting, down from 48% odds before the inflation report, according to the CME FedWatch Tool. A week ago, traders put a 54% chance for a September rate hike. UPDATE (Aug. 12, 13:01 UTC): Adds analyst comment.

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