Core Inflation and Fed Interest Rate Expectations  

Federal Reserve officials and market participants are closely monitoring the impact of this inflation increase on interest rate policies. Members of the Federal Open Market Committee (FOMC) have previously indicated that they may delay rate cuts if inflation remains higher than expected. For instance, Fed Chair Jerome Powell recently stated, “Controlling inflation remains our priority.”  

Following May’s data, the likelihood of a rate cut in June has significantly diminished. According to the Kalshi prediction platform, rate cut expectations have dropped sharply. This shift has affected investors’ risk appetite, causing new volatility in financial assets.  

Liquidity and Inflation Reaction in Crypto Markets  

Global liquidity growth has fueled gains in cryptocurrency markets. Experts note that Bitcoin rose 4% to $110,000, moving in sync with the increase in M2 money supply. Other cryptos like Ethereum and Solana also saw similar gains. Analysts highlight that Bitcoin tends to follow changes in M2 money supply within a 71-day cycle.  

Investors eagerly await the June 11 CPI report. This data will reveal whether inflation is persistent and what path the Fed will take. Markets expect interest rates to remain around 425-450 basis points. However, inflation continues to rise. In this environment, the Fed prefers to wait before cutting rates. Federal Reserve officials, especially Chair Jerome Powell and St. Louis Fed President Alberto Musalem, have indicated they would not consider rate cuts if inflation becomes persistent.  

Traditional assets such as bonds and stocks could remain pressured due to inflation. Meanwhile, cryptocurrencies continue to benefit from increased global liquidity, deepening the divergence between markets.  

In summary, today’s US CPI report will be the most critical data guiding the markets.  

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