Inflation Eases to 3.4% as Bitcoin Nears $64,000

The U.S. Bureau of Labor Statistics reported on Aug. 12 that the Consumer Price Index rose 0.1% in July. Annual inflation fell to 3.4% from 3.5% in June. Core CPI, which excludes food and energy, rose 0.2% for the month and 2.5% from a year earlier. The monthly reading matched market expectations.

Housing costs were the largest contributor to the July increase. Shelter prices rose 0.1% and accounted for roughly two-thirds of the overall CPI gain. Both rent and owners’ equivalent rent increased 0.3%. Food prices edged up 0.1% overall, with restaurant and food-away-from-home prices up 0.3% while grocery prices declined 0.1%.

Energy prices declined 1.5% for the month as gasoline fell 2.9% on a seasonally adjusted basis. Despite the monthly drop, energy prices were 14.7% higher than a year earlier and gasoline was 24.6% above last year’s level. At the time of the report, Brent crude traded near $91 per barrel and West Texas Intermediate near $83.

Certain services and goods recorded notable gains. Medical care rose 0.4% in July, airline fares jumped 2.2%, used cars and trucks gained 0.4%, and new vehicle prices increased 0.1%.

The Federal Reserve left its target federal funds range at 3.50% to 3.75% in late July, with three officials dissenting in favor of a rate increase. Fed officials have said they want to see several cooler months of data before concluding inflation is returning to 2%.

Financial markets showed a muted reaction to the CPI release. U.S. equities opened higher in pre-market trading. Measures of real average hourly earnings showed pressure where consumer prices outpaced wage growth.

Bitcoin traded in a narrow range around the CPI release, roughly between $63,800 and $64,300, and was down about 0.4% over the hour surrounding the report. The next monthly CPI report, covering August, is scheduled for Sept. 11 and will be watched for changes in energy, shelter and core services.