Just weeks ago, nearly half the market was bracing for the Fed to hike rates in July. Then the June inflation numbers landed, and those expectations evaporated.
The June 2026 Consumer Price Index, released on July 14, showed headline CPI falling 0.4% month-over-month, the steepest single-month drop since April 2020. Year-over-year inflation cooled to 3.5%, down from 4.2% the prior month. Core CPI, which strips out volatile food and energy prices, came in flat on the month and rose just 2.6% annually, a notable retreat from 2.9%.
From hawkish panic to collective exhale
Prior to the CPI release, traders had priced in a 42-50% probability that the Federal Reserve would raise rates at its July 28-29 FOMC meeting. Bitcoin, Ethereum, and XRP all experienced downward pressure as hike odds climbed, with traders rotating out of risk assets in anticipation of tighter monetary policy.
Now, with inflation showing clear signs of cooling, the consensus view is that the Fed will hold its benchmark rate steady at the current 3.50%-3.75% target range. The central bank has maintained this range since its June meeting, and the fresh CPI data gives policymakers little reason to act aggressively.
