U.S. June CPI fell 0.4%, cooling Fed rate-hike expectations
In brief
- U.S. CPI fell 0.4% in June, beating economist forecasts of 0.1% decline
- Core CPI flat versus 0.2% increase forecast; year-over-year core rose 2.6% vs. 2.8% expected
- Soft inflation data likely pauses fast-rising Fed rate-hike expectations for imminent action
- Bitcoin rose to $63,400 (up ~2% in 24 hours); Nasdaq 100 futures up 1.25%
Inflation Cools Sharply
The CPI decline of 0.4% in June beat economist forecasts that had called for just a 0.1% decline. On a year-over-year basis, CPI was up 3.5% versus forecasts for 3.8%. Core CPI, which excludes food and energy, proved even more dovish: it was flat in June against forecasts of a 0.2% increase. Year-over-year, core CPI rose 2.6% against expectations for 2.8%.
The report arrived at a critical moment. Fed Governor Chris Waller had signaled yesterday that he would favor an immediate rate hike if core CPI did not decline in this morning's data. The softer print likely shifts the calculus for the Federal Reserve's late-July meeting.
Market Reaction
Risk assets moved higher on the news. Bitcoin rose to $63,400, up about 2% over the past 24 hours following the soft CPI numbers. U.S. stock index futures also rose, with the Nasdaq 100 up 1.25%.
Fixed income responded predictably. The U.S. 2-year Treasury yield fell seven basis points to 4.19%, while the 10-year fell five basis points to 4.56%.
Broader Context
Crypto markets showed resilience in June. CEX spot trading volumes climbed 15.3% to $1.11 trillion, marking the first monthly gain in five months. RWA perpetual volumes surged to a record $311 billion during the same period.
Fed Chairman Kevin Warsh is scheduled to testify to Congress on the state of the economy roughly 90 minutes after this report's release, giving investors a chance to hear the central bank's immediate read on today's inflation data.
