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U.S. June CPI fell 0.4% month-over-month against economist forecasts for a 0.1% decline, a sharp reversal from May's 0.5% surge. Year-over-year inflation cooled to 3.5% from 4.2%, while core CPI, which strips out food and energy, came in flat against expectations for a 0.2% rise. Core CPI's annual print of 2.6% undershot the 2.9% consensus.
Why it matters
The report landed just hours after Fed Governor Chris Waller had telegraphed openness to an immediate rate hike if core inflation failed to soften. July rate-hike probabilities had climbed to 42% on Tuesday from 8% one month earlier, according to CME FedWatch. A flat core print, paired with a 0.4% headline drop, pulls that hawkish drift back toward the dovish end of the spectrum. Investors are now waiting on Fed Chairman Kevin Warsh's congressional testimony, set to begin roughly 90 minutes after the data crossed.
Market impact
Bitcoin extended earlier gains after the release, trading near $63,400 and up about 2% over the prior 24 hours. Risk assets broadly caught a bid as the front end of the curve repriced the timing of the next Fed move. Separately, centralized exchange volumes rose for the first time in five months in June: spot climbed 15.3% to $1.11T and RWA perpetual volumes hit a record $311B, a backdrop that gives the macro tailwind a real liquidity floor to lean on.
CEX trading volumes rose for the first time in five months in June, with spot climbing 15.3% to $1.11T and RWA perpetual volumes surging to a record $311B.
Frequently asked questions
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What did the June U.S. CPI report show?
Headline CPI fell 0.4% month-over-month against expectations for a 0.1% decline, while core CPI was flat versus forecasts of a 0.2% rise. Year-over-year, headline inflation cooled to 3.5% from 4.2% and core to 2.6% from 2.9%.
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How did the report affect Federal Reserve rate-hike expectations?
July rate-hike probabilities had climbed to 42% on Tuesday from 8% a month earlier, per CME FedWatch. The softer-than-expected core print pulled that hawkish drift back, easing pressure on the Fed ahead of its late-July meeting.
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What did Fed Governor Chris Waller say before the release?
Waller had implied he would be in favor of an immediate rate hike if core CPI did not come down in the June report, framing the data as a binary trigger for near-term policy action.
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How did Bitcoin react to the CPI print?
Bitcoin extended earlier gains after the release, trading near $63,400 and up about 2% over the prior 24 hours as risk assets caught a bid on the softer inflation read.
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What else is on the macro calendar today?
Fed Chairman Kevin Warsh was set to begin congressional testimony on the state of the economy roughly 90 minutes after the CPI data crossed, giving investors the next read on the Fed's reaction function.
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