US inflation in June came in much softer than expected, likely putting rapidly rising expectations of impending rate hikes by the Federal Reserve on hold.
The consumer price index (CPI) fell 0.4% in June, compared with economists’ forecasts for a 0.1% drop and May’s strong 0.5% rise.
On an annual basis, the CPI rose by 3.5% compared to forecasts of 3.8% and 4.2% in May.
Core CPI, which excludes food and energy, was flat in June, against forecasts of 0.2% and corn rose 0.2%. On an annual basis, core CPI rose 2.6% against expectations of 2.9% and 2.9% in May.
Bitcoin added to earlier gains after the soft numbers, rising to $63,400, up about 2% over the past 24 hours.
Already a key data point, June’s CPI was of particular importance after Fed Governor Chris Waller hinted yesterday that he would favor an immediate rate hike if core CPI did not fall in this morning’s report. In fact, yesterday the probability of interest rate hikes in July had risen to as high as 42% from just 8% a month ago, according to CME FedWatch.
Investors will hear what Fed Chairman Kevin Warsh thinks about all of the above in about 90 minutes when he begins his testimony to Congress on the state of the economy.
