Bitcoin Rises Past $63,500 After June US CPI Miss Cools Fed Rate-Hike Bets

A bigger-than-expected drop in the US consumer price index in June may reduce the chances of a Federal Reserve rate increase later this month.

CoinDesk, a cryptocurrency-focused media outlet, said on July 14 that the CPI report could “halt rapidly rising expectations for an immediate Fed rate hike.” With the Federal Open Market Committee meeting scheduled for late July, the inflation data could prove pivotal to the rate decision.

US CPI for June, released earlier in the day, fell 0.4% from the previous month. That was a steeper decline than the market forecast for a 0.1% drop and a sharp reversal from the prior month’s 0.5% increase. On a year-over-year basis, CPI rose 3.5%, below both the market estimate of 3.8% and the previous month’s 4.2%.

Core CPI also slowed. June core CPI, which excludes food and energy, was unchanged from the previous month, versus a market forecast for a 0.2% increase. From a year earlier, core CPI rose 2.6%, below the 2.8% estimate and the previous month’s 2.9%.

Bitcoin (BTC) extended its gains after the inflation report, rising to around $63,400. It was up about 2% over the past 24 hours.

US stock-index futures also advanced, with Nasdaq 100 futures up 1.25%.

Treasury yields, by contrast, declined. The two-year Treasury yield fell 7 basis points to 4.19%, while the 10-year yield dropped 5 basis points to 4.56%.

Earlier, Federal Reserve Governor Christopher Waller had indicated he could support an immediate rate increase if June core CPI did not cool. CME FedWatch showed the probability of a July rate hike briefly jumping to 42% a day earlier, from about 8% a month ago.

Markets are now focused on how much the softer CPI reading will weaken the case for a July rate increase and whether additional signals emerge from congressional testimony by Fed Chair Kevin Warsh scheduled about 90 minutes later.