Karla Barker 
U.S. inflation data for June came in far softer than economists had predicted. This is likely to pause the growing expectations for a Federal Reserve interest rate hike. The Consumer Price Index dropped 0.4% last month. Forecasts had called for a 0.1% decline, following a sharp 0.5% rise in May.
On a year-over-year basis, CPI was up 3.5%. That is lower than the predicted 3.8% and below May’s 4.2% reading. Core CPI, which strips out volatile food and energy prices, was flat in June. Analysts had expected a 0.2% increase, matching May’s gain. Annually, core CPI rose 2.6%, beating expectations of 2.8% and easing from 2.9% in May.
Bitcoin reacts positively
Bitcoin added to its earlier gains following the release of the soft numbers. The cryptocurrency rose to around $63,400, up about 2% over the past 24 hours. This suggests some investors see lower inflation as a reason to take on more risk.
June’s CPI report carried extra weight this month. Fed Governor Chris Waller had hinted yesterday that he would support an immediate rate hike if core inflation did not come down. Prior to the report, markets had priced in a 42% chance of a July rate increase, a sharp jump from just 8% one month ago, according to CME FedWatch data.
What comes next
Investors are now waiting to hear from Fed Chairman Kevin Warsh. He is set to begin his testimony to Congress in about 90 minutes, where he will discuss the state of the economy. His comments could provide more clarity on the central bank’s next moves.
The cooling inflation data may give the Fed room to hold off on tightening further. But the situation remains fluid. Many will be watching the Congressional testimony closely for any shifts in tone.