Despite a slight increase in September, the cooling trajectory of United States inflation continues to support prospects of more interest rate cuts that could set up a favorable scenario for Bitcoin and other cryptocurrencies. 

The US Bureau of Labor Statistics reported on Oct. 10 that the Consumer Price Index (CPI) rose at a 2.4% annual rate in September — its lowest level since February 2021.

The data is just above the expected 2.3% for the month but still in a negative trend — below August’s year-over-year increase of 2.5%. Two years ago, the country’s inflation rate stood at 8.2%. It peaked at 9.1% in June 2022.

Source: US Bureau of Labor Statistics

According to digital assets firm 21Shares , despite the “persistent rise in prices,” recent nonfarm payrolls data, which showed that unemployment fell from 4.2% to 4.1%, suggests an “80% probability of a 25 basis point rate cut in the upcoming month.”

“Bitcoin and a broader array of crypto assets are particularly sensitive to inflation metrics, as these indicators heavily influence the Fed’s monetary policy decisions,” explained Leena ElDeeb, research analyst at 21Shares. She added: 

“A reduction in rates tends to have a favorable impact on Bitcoin by lowering borrowing costs. Consequently, we anticipate a recovery in market flows following the recent geopolitical tensions that have disrupted the financial landscape.”

Lower borrowing costs typically drive more investment in riskier assets, such as cryptocurrencies and stocks. However, trader sentiment has not improved with the latest inflation report .

The Bitcoin ( BTC ) price continued its negative trend from the previous days , down 1.6% and trading at $60,604 at the time of writing. 

The Federal Open Market Committee (FOMC) is faced with a plate of mixed data to examine the path of the US economy.

The Bureau of Economic Analysis reported that US gross domestic product grew at a solid 3% annual rate between April and June. However, weekly jobless claims hit a 14-month high on Oct. 5, with 258,000 filings in the country.

Data from CME Group’s FedWatch gauge shows markets boosted odds to 89% that the Fed will lower rates by 25 basis points at its next policy meeting, scheduled for Nov. 6-7.

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