All Eyes on CPI Data as Fed Rate Cut Hopes Fade

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All Eyes on CPI Data as Fed Rate Cut Hopes Fade

• CPI data may influence Feds timeline for rate cuts amid fading first-half expectations.
• Strong jobs report reduces chances of rate cuts at June and July FOMC meetings.
• Trade policy uncertainty adds complexity to Feds interest rate decisions in 2025.

Crypto markets are on high alert for the May U.S. Consumer Price Index (CPI) report on June 11, a high-stakes data release that will test the markets waning hopes for a near-term Federal Reserve rate cut. The inflation figures arrive just days after stronger-than-expected jobs data significantly dampened expectations for monetary easing in the first half of the year.

This CPI print is now a critical pivot point that could either bolster the Feds argument for keeping rates “higher for longer” or provide the first concrete evidence that inflation is cooling enough to justify a cut later in the year.

Strong Jobs Report Tempers Rate Cut Expectations

According to MarketWatch, analysts expect the May CPI to register a 0.2% month-over-month increase and a 2.5% year-over-year increase. The Core CPI, which excludes volatile food and energy prices, is projected to come in at 0.3% MoM and 2.9% YoY. If the results align with or fall below expectations, analysts suggest they could support the claim for rate cuts later in the year.

However, the report follows the June 6 release of U.S. jobs data that showed the economy added a robust 139,000 jobs, beating forecasts. In response, the CME FedWatch tool now shows a 97.4% probability that the Fed will hold its benchmark rate steady at the upcoming June FOMC meeting, with an 83.3% chance of another hold in July.

Fed Remains Cautious From Trade Policy Uncertainty

Despite the influx of economic indicators, Federal Reserve decision-making remains clouded by ongoing uncertainties, particularly surrounding U.S. trade policy. Joseph Pruscino noted that while the Fed has sufficient data, it continues to deal with uncertainty tied to tariffs and broader trade dynamics.

Recent developments have added to this ambiguity. On May 28, the U.S. Court of International Trade ruled against President Donald Trumps tariffs, but an appeals court later upheld them. Trump has since announced an increase in tariffs on foreign steel and aluminum to 50%.

Pruscino emphasized that continued improvement in market sentiment is necessary for risk assets like Bitcoin to push beyond the $112,000 level. He also stated that the May jobs report would serve as a major signal for the Federal Reserves next steps, particularly regarding interest rate policy.