U.S. inflation data for May was largely in line with market expectations, further reinforcing the view that the Fed will maintain high interest rates in the near term. After the data release, Bitcoin experienced minor fluctuations but remained consolidated above $61,000, showing overall weak performance.
In May, the CPI rose year-over-year to 4.2%.
The U.S. Bureau of Labor Statistics reported that the Consumer Price Index (CPI) rose 4.2% year-over-year in May, in line with market expectations and higher than April’s 3.8%. On a monthly basis, the CPI increased 0.2% in May, below the expected 0.5% and also lower than April’s 0.6%.
Regarding core CPI, which excludes food and energy, May saw a monthly increase of 0.2%, below the expected 0.3% and lower than April’s 0.4%; year-over-year, it rose by 2.9%, in line with market expectations and slightly above April’s 2.8%.
Expectations are rising that the Federal Reserve will hold rates steady in June.
After the release of this data, the market continued to bet that the Federal Reserve will hold rates steady at its June 17 meeting. According to the CME FedWatch tool, prior to the data release, the market had already assigned a 98% probability that the Fed would not adjust rates this month.
According to CoinDesk, citing market pricing, investors currently believe that the Federal Reserve is unlikely to cut rates in the near term and may still raise rates by another 25 basis points before the end of this year. This suggests that the "higher for longer" interest rate narrative has not significantly weakened.
Bitcoin remains above $61,000
After the data release, Bitcoin briefly rose in the short term but continued to face pressure. At the time of the report, Bitcoin was trading at approximately $61,700, slightly down over the past 24 hours, yet remaining above $61,000.
Other markets also showed synchronized reactions. All three major U.S. stock index futures declined, the 10-year U.S. Treasury yield rose to 4.5%, and WTI crude oil fell another ~1% on the day, trading near $88.
From the perspective of asset correlations, inflation has not shown significant cooling, causing market expectations for accommodative policy to be pushed further into the future. This has weighed on risk assets and prevented Bitcoin from sustaining a rebound following the macroeconomic data release.