U.S. June CPI Drops 0.4%, Cooling Fed Rate Hike Bets
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- Headline CPI fell 0.4% in June versus forecasts for a 0.1% drop and May's 0.5% rise, with the year-over-year rate cooling to 3.5% from May's 4.2%
- Core CPI was flat in June against expectations of a 0.2% rise, bringing the year-over-year core rate to 2.6% from 2.9% in May
- Fed Governor Chris Waller had signaled the day before that he would back an immediate rate hike if core CPI failed to come down in the June report
- July rate hike probabilities had climbed to 42% from just 8% one month earlier, per CME FedWatch, before the soft print collapsed that bet
- Bitcoin added to earlier gains after the report, reaching $63,400, up roughly 2% over 24 hours, while Nasdaq 100 futures rose 1.25%
- Treasury yields dropped sharply, with the 2-year falling seven basis points to 4.19% and the 10-year down five basis points to 4.56%
- Fed Chairman Kevin Warsh was scheduled to testify to Congress on the state of the economy roughly 90 minutes after the data crossed
Why it matters: Waller had publicly tied his rate-hike support to today's core CPI outcome, and the flat print removes that trigger while bond markets immediately repriced — the 2-year yield shed 7 bps to 4.19%. With July hike odds collapsing from 42% back toward single digits, traders now turn to Warsh's congressional testimony for confirmation of the Fed's next move.
