U.S. inflation in June was much weaker than expected, likely putting on hold sharply rising expectations for impending Federal Reserve rate hikes.
The consumer price index (CPI) fell 0.4% in June, compared with a 0.1% drop forecast by economists and a sharp rise of 0.5% in May.
On an annual basis, the CPI rose 3.5% compared to forecasts of 3.8% and 4.2% in May.
Core CPI, which excludes food and energy, remained stable in June, compared with a forecast of 0.2% and a 0.2% rise in May. On an annual basis, the core CPI increased by 2.6% compared to 2.9% and 2.9% expected in May.
Bitcoin added to earlier gains following the weak numbers, hitting $63,400, up around 2% in the past 24 hours.
Already a key data point, the June CPI was particularly important after Fed Governor Chris Waller suggested yesterday that he would favor an immediate rate hike if the core CPI did not fall in this morning’s report. Indeed, the odds of a rate hike in July reached 42% yesterday, compared to just 8% a month ago, according to CME FedWatch.
Investors will have a chance to hear what Fed Chairman Kevin Warsh thinks about all of the above in about 90 minutes, as he begins his testimony before Congress on the state of the economy.
