U.S. inflation dropped to 8.5% in July

The news that the US CPI, a commonly recognized inflation indicator, has been declining caused the cryptocurrency market to respond favorably.

Inflation in the U.S. economy slowed somewhat in July, reaching a level below analysts’ predictions as the thesis that inflation has reached its greatest point is solidified.

Inflation in the US hit a four-decade high in June before cooling down and increasing by 1.3 percent in July. The index for gasoline prices declined 7.7 percent in July, which contributed significantly to the reduction.

A 4.6% decrease in energy costs last month countered gains of 1.1% and 0.5%, respectively, in the food and housing indices. With food and energy costs excluded because of their high volatility, core CPI remained constant at 5.9% over the last 12 months, falling short of forecasts of 6.1%.

Analysts had projected a rise in inflation of 8.7% YoY and 0.2% MoM, but the results came in lower than that. It is important to remember that average inflation is still very close to 40-year highs.

Cryptocurrencies rose

The revelation seemed to have an impact on the cryptocurrency market favorably since numerous important digital currency values increased after the news was released. After closing just under USD $23,000 on Tuesday afternoon, Bitcoin (BTC) climbed again to over USD $24,000.

Important altcoins imitated the rising trend, which gave the market a green hue. According to Coingecko, the market capitalization of cryptocurrencies increased 3.59% over the previous day.

How will the economy react?

The increase might be a sign of traders’ softening attitude as they expect the U.S. Federal Reserve (Fed) would soften its aggressive approach to tightening monetary conditions in response to the slowdown in inflation.

This year, the Fed has aggressively increased interest rates and tightened monetary policy in an effort to slow inflation, which is still far below its long-term objective of 2%.

However, the country’s economic slump makes the high inflation even worse.

The pace of rate rises will most likely not reduce for the time being, as long as living expenses continue to be higher than anticipated levels, despite the fact that today’s numbers indicate that inflationary pressures are reducing slightly. This might relieve pressure on the Fed.

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