The prices of Bitcoin and other leading cryptocurrencies popped Wednesday after a widely watched inflation gauge showed that U.S. consumer prices increased last month by less than economists had expected.

The Consumer Price Index (CPI) rose 3.3% in the 12 months through May, the U.S. Bureau of Labor Statistics said Wednesday, coming in slightly below economists’ forecast of 3.4%. Previously, the index tracking American goods and services showed that consumer prices rose 3.4% annually.

Immediately following the report’s release, Bitcoin jumped 2.8% to around $69,500 from $67,900. Other cryptocurrencies, including Ethereum and Solana, showed gains of over 3% over the past day, but their prices had still fallen over the past week after Friday’s flash crash.

Meanwhile, the S&P 500 and tech-heavy Nasdaq Composite opened in the green. The move came just hours before the Federal Reserve’s June policy meeting, where the U.S. central bank is expected to hold its benchmark interest rate steady for an 11th straight month.

As the Fed’s decision loomed, Bitcoin is nearing a price of $70,000 as of this writing, showing gains of over 4% over the past day, according to CoinGecko.

On a month-to-month basis, U.S. inflation was flat. The reading followed a 0.3% bump in consumer prices in April and a 0.4% increase in March and February.

While investors had already anticipated that Fed policymakers would leave interest rates untouched Wednesday, rate cut hopes for September strengthened, however. That chance rose after the report’s release to 62% from 46%, according to the CME Group’s FedWatch Tool. 

Likely delivering a boost to the U.S. economy through lower borrowing costs, Fed Chair Jerome Powell said last month that policymakers need “greater confidence” that inflation is heading to its target of 2% annually before loosening monetary policy through rate cuts.

Shifting rate cut expectations dented Bitcoin’s price in April, knocking the cryptocurrency away from all-time highs above $73,000 a month prior. However, analysts say Bitcoin could test those prices again as a path toward rate cuts emerges with more certainty and a weaker U.S. dollar.

“At this point, my confidence in Fed rate cuts is pretty high,” Grayscale's Head of Research Zach Pandl said on Twitter (aka X), adding that rate cuts becoming a base case again is good for the strength of Bitcoin relative to the dollar in a separate post.

Markets largely shrugged at hotter-than-expected U.S. job growth last Friday. Still, hours after the figures were released, Bitcoin plunged alongside the rest of the crypto market, causing hundreds of millions of dollars worth of liquidations in leveraged crypto positions.

On Wednesday, the dollar value of liquidated positions was comparatively muted. Within the past four hours, $10 million worth of crypto long positions have been purged, while bearish traders saw $39 million worth of short positions be closed, per data from CoinGlass.

Edited by Andrew Hayward