June CPI Report: US Inflation Reaches Highest Level Since February

• Headline inflation rose 0.3% MoM (month-on-month), which is its largest monthly increase since January
• YoY (year-on-year) also increased to 2.7%, up from May’s 2.4%
• The Fed is expected to hold rates in July, with a potential cut delayed until September

The Bureau of Labor Statistics released the US CPI (Consumer Price Index) report for June, showing that headline inflation rose 0.3% MoM (month-on-month), which is its largest monthly increase since January. 

When it comes to YoY (year-on-year), it also increased to 2.7% (highest since February), up from May’s 2.4% – driven mainly by shelter, energy, and tariff-influenced goods like appliances and furniture.

Additionally, core CPI (excluding food and energy) increased 0.2% MoM and 2.9% YoY, showing persistent ‘sticky’ inflation in services and housing. It seems tariffs are now starting to reach consumers, but their overall impact remains average for now.

The Impact: Hopes for a Fed Rate Cut Fading Fast

The Fed is expected to hold rates in July, with a potential cut delayed until September, as higher inflation tempers expectations.

Interestingly, according to the CME Group’s FedWatch Tool, odds of a rate cut in September dropped below 60%, though they were over 80% just last week.

This immediately had an impact on the crypto market, considering Bitcoin saw an approximate 6% drop, falling from around $123k to $116k. A likely cause is due to inflation raising doubts about early Fed rate cuts.

The crypto market as a whole also saw a decline of about 4%, with traders probably anticipating volatility around CPI and PPI (Producer Price Index) releases.

Why this matters for crypto

Generally speaking, Fed rate decisions drive crypto flows as higher rates suppress risk assets like crypto, while cuts boost liquidity.

Persistent inflation above 2% is postponing interest rate cuts, which, in turn, is dampening the cryptocurrency rally.

For instance, in early 2024, sticky inflation caused Bitcoin to pull back from $75k to roughly $60k as rate cut optimism faded.

As noted above, crypto markets already reacted with a pullback, which suggests that investors are adjusting their expectations with a general feeling of not knowing what’s coming.

Bitcoin’s narrative as digital gold often shines in systemic inflation crises such as the one in 2021 and 2022. However, within a mild, managed inflationary climate, it becomes more challenging to emphasize the need for a hedge, and investors typically revert to more cautious, risk-controlled positions in such circumstances.