US consumer inflation slows more than expected in June, Bitcoin rallies as rate hike fears fade

The June Consumer Price Index came in cooler than almost anyone on Wall Street expected, with headline inflation actually falling 0.4% month-over-month. Economists had forecast a modest 0.1% decline. In English: prices didn’t just slow down, they reversed course in a way that caught the consensus off guard.

Bitcoin responded the way risk assets tend to when the inflation boogeyman takes a day off. The largest cryptocurrency climbed roughly 2% during the session to approximately $63,400, as traders repriced the odds of a near-term Federal Reserve rate hike.

The numbers tell a clear story, for now

On a year-over-year basis, headline CPI eased to 3.5%, down from 4.2% in May and below the 3.8% forecast.

The core CPI reading, which strips out volatile food and energy prices, was even more striking. It came in completely flat on a monthly basis, versus expectations for a 0.2% increase. Year-over-year, core inflation registered 2.6%, undershooting the 2.8% consensus and cooling from May’s 2.9% reading.

For context, May’s headline CPI had risen 0.5% month-over-month. So the swing from a half-percent increase to a 0.4% decline represents a nearly full percentage point reversal in a single month. It happened because of energy prices. Specifically, the collapse in oil and gasoline costs following the US-Iran ceasefire deal.

Why crypto markets care about CPI prints

Before this report landed, rate hike probabilities for July had climbed as high as 42%. After the data dropped, those probabilities fell meaningfully, creating breathing room for risk assets. Bitcoin’s 2% pop to $63,400 was a recalibration driven by markets pricing in lower odds of a rate hike.

The ceasefire dividend might have an expiration date

The primary driver of this CPI miss was energy, and energy price declines tied to geopolitical events are inherently unpredictable. Core CPI’s flat reading is more encouraging because it filters out exactly this kind of noise. A 2.6% year-over-year core rate is moving in the right direction, closer to the Fed’s 2% target, cooling from May’s 2.9% reading.

Federal Reserve Governor Chris Waller and Chairman Kevin Warsh were both scheduled to deliver congressional testimony on the same day as the CPI release. Their commentary will be closely watched for any signal about whether the Fed views this as a genuine inflection point or a one-off driven by energy.

Traders should also keep an eye on upcoming Producer Price Index data and the next jobs report, both of which feed into the Fed’s decision-making framework.

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