U.S. CPI Falls to 3% in June, Core Rate Drops to 4.8%; Both Better Than Expected

The U.S. inflation rate as measured by the Consumer Price Index (CPI) slipped to 3.0% on a year-over-year basis in June from 4.0% in May, according to the Bureau of Labor Statistics (BLS), and versus expectations for a dip to 3.1%. On a monthly basis, the CPI was higher by 0.2% in June versus 0.1% in May and expectations for 0.3%.

The core CPI, which strips out volatile food and energy costs, fell to 4.8% from 5.3% previously and against forecasts for 5.0%; the monthly core CPI was 0.2% in June versus 0.4% in May and forecasts for 0.3%.

The price of bitcoin (BTC) – which has been in a holding pattern between $30,000 and $31,000 for much of the past few days – rose modestly to $30,900 in the immediate aftermath of the report, but subsequently gave back that gain, returning to just under $30,800.

Today’s report shows headline inflation continuing to decline, with June’s 3% down from a peak of 9.1% in 2022. Maybe more importantly to the policymakers at the Federal Reserve, the core rate of inflation finally began to budge – to 4.8% from 5.3% – after stubbornly remaining above 5% this year. That 4.8% year-over-year level was the slowest pace since October 2021.

Nevertheless, markets and the Fed (if recent speakers are to be believed) continue to anticipate another rate hike when the central bank’s rate-setting Federal Open Market Committee (FOMC) meets later this month. The CME’s FedWatch tool shows a 91.1% chance of the FOMC boosting rates at its July 25-26 meeting.

Though bitcoin is barely budging on the good inflation news, traditional markets are on the move, with the U.S. 10-year Treasury yield down 6 basis points to 3.91% and the 2-year yield off 14 basis points to 4.73%. The dollar index has slipped 0.5% and stock index futures are pointing to a nearly 1% gain at the open.