Odaily, citing Jinshi, reported that the US May CPI data showed inflation climbing to its highest level in three years. However, the more moderate rise in core prices helped ease Wall Street’s concerns about a near-term Federal Reserve rate hike. The contrast between headline inflation and core price growth has put the focus on how the Fed will describe its policy stance at its upcoming meeting.
Core prices temper concerns over immediate tightening
The CPI release is one of the key pieces of data shaping expectations for the Federal Reserve’s next policy statement. According to the report, today’s CPI figures and tomorrow’s PPI index are expected to influence the Fed’s stance, which will be announced at a meeting one week from now. That meeting will be chaired by Waller for the first time, according to the source text.
CME FedWatch showed that before the CPI inflation data was released, pricing already assigned a 70% probability to the Federal Reserve raising interest rates by the end of 2026. This indicates that expectations for a later rate hike remain present in the market’s view of the longer-term policy path, even as the near-term outlook remains more cautious.
July hike probability is only 13%
For the upcoming meeting next week, the market views a rate hike as almost impossible, according to the report. The probability of a hike at the July meeting is only 13%. The immediate question is whether the Federal Reserve will clearly shift its policy language from an easing-leaning stance toward a neutral position, or toward a tightening-leaning position.
The report also noted that this week’s CPI and PPI inflation data, together with progress in US-Iran talks, may affect the balance between a neutral and tightening policy stance. For the crypto market, US inflation readings and Federal Reserve rate expectations remain important macro variables followed by risk assets such as Bitcoin and Ethereum.