U.S. inflation was much lower than expected in June, likely putting rapidly rising expectations for an impending rate hike by the Federal Reserve on hold.
The consumer price index (CPI) fell by 0.4% in June, but economists expected it to fall by 0.1%, and for May it rose sharply by 0.5%.
Compared to the same month last year, the CPI increased by 3.5%, compared to the expected 3.8% and 4.2% in May.
Core CPI, which excludes food and energy, was flat in June, compared to an expected 0.2% rise in May. Compared to the same month last year, core CPI rose 2.6% compared to May’s estimates of 2.8% and 2.9%.
Bitcoin added to earlier gains on the weak numbers, rising about 2% to $63,400 in the past 24 hours.
Already an important indicator, the June CPI became particularly important yesterday after Fed Director Chris Waller indicated in this morning’s report that he would support an immediate rate hike if the core CPI did not fall. In fact, the probability of a rate hike in July rose to 42% yesterday, up from just 8% a month ago, according to CME FedWatch.
Investors will hear what Federal Reserve Chairman Kevin Warsh thinks about all of the above in about 90 minutes as he begins his testimony to Congress on economic conditions.
