US inflation data came in as expected on Wednesday, reinforcing the view that the Federal Reserve will hold interest rates at 350-375 bps at the June 17 meeting, but is likely to raise rates by 25 bps by the end of the year.
The year-over-year consumer price index rose 4.2% in May, according to a report from the Bureau of Labor Statistics. Economists had expected a 4.2% increase after the 3.8% rise in April.
On a monthly basis, CPI rose 0.2% against expectations of 0.5% and against April’s increase of 0.6%. Core CPI, which excludes food and energy costs, rose 0.2% in May against forecasts of 0.3% and April 0.4%. Year-on-year core CPI was higher at 2.9%, versus forecasts of 2.9% and April’s 2.8%.
While bitcoin saw a slight increase after the data was released, it remains under pressure. Bitcoin traded just above $61,000 after the report, largely unchanged over the past 24 hours. US stock index futures fell across the board and the 10-year Treasury yield rose to 4.5%. WTI crude continues to fall, down another 1% on the day to $88.
Ahead of the CPI data, markets were pricing in a 98% probability that the Federal Reserve would leave interest rates unchanged at its June meeting, according to the CME Fed Watch tool.
