U.S. Inflation Cools in May, Strengthening Rate-Cut Expectations as Bitcoin Ticks Higher

Inflation came in softer than expected in May, reinforcing hopes that the Federal Reserve could begin cutting interest rates later this year.

The Consumer Price Index (CPI) rose just 0.1% last month, slightly below economists’ forecasts for a 0.2% gain and down from April’s 0.2% increase, according to data released by the Bureau of Labor Statistics on Wednesday. On a year-over-year basis, headline CPI increased 2.4%, also under the consensus estimate of 2.5% and modestly higher than April’s 2.3% pace.

Core CPI, which excludes volatile food and energy prices, also advanced just 0.1%, well under expectations for a 0.3% rise. The annual core inflation rate held steady at 2.8%, slightly below the forecast of 2.9%.

Markets Hold Steady on Rate-Cut Bets

Following the data release, Bitcoin (BTC) rose 0.6%, briefly touching $109,800, building on a modest 0.3% gain over the previous 24 hours. The crypto market welcomed the inflation miss as a potential tailwind for risk assets.

Traders remain confident in a dovish Fed pivot later this year. According to the CME FedWatch Tool, markets are fully pricing in two rate cuts — one in September, followed by another in December.

Traditional financial markets also responded positively. U.S. stock index futures, which had been trading lower earlier in the session, reversed course to post 0.4% gains across major indices. The 10-year Treasury yield fell five basis points to 4.45%, reflecting the market’s revised inflation outlook.