CPI “wild card” positive news was extinguished by the Fed with a bucket of cold water—what happens next?
For the first time in six years, the US CPI month-on-month turned negative.
-0.4%. The expectation was only -0.1%, but the actual result delivered a four-times larger drop.
Year-on-year 3.5%, prior 4.2%, expectation 3.8%. Core CPI year-on-year 2.6%, expectation 2.8%. Core CPI month-on-month 0%—the smallest increase since January 2021.
In any normal year, this data would be enough to make the market celebrate for three days and nights.
But the reality is— the celebration lasted only a few hours.
Bitcoin broke above $65,000 intraday, up more than 4%. Gold briefly surged by over $50. US Treasury yields fell, and stock index futures strengthened.
So what’s next?
That day, Fed Chair Worsh testified before Congress, and directly poured cold water on it:
“Some might say the task is done—I don’t see it that way.”
Governor Waller was even harsher—if inflation still shows no progress for a long time, rate hikes should be considered.
One piece of data is good news, and two hawkish remarks. The market got stuck between the numbers and the statements.
Why? What is the Fed afraid of?
Because the June CPI pullback was propped up by one thing— a collapse in oil prices.
In June, the energy index fell 5.7% month-on-month, while gasoline prices crashed 9.7%. And why did oil prices drop? The US and Iran halted hostilities, and the Strait of Hormuz reopened.
But the ceasefire has already broken down.
On July 8, the ceasefire broke. US airstrikes, Iran’s blocking statement—Brent crude surged back from $70 per barrel to $86.
June’s CPI reflects a world that no longer exists. July’s CPI will be published in August—and that data will likely be an entirely different story.
So what is the Fed doing now? Managing expectations
They don’t want the market to ease financial conditions too early because of a “fake CPI caused by a sudden oil-price crash.” Worsh repeatedly reiterated the long-term inflation target and refused to treat a single month’s data as a policy signal. Waller said they need to see several more months of good data before changing their stance.
Translation: don’t get too happy— I’m not buying it.
So which way will it go next? Two paths, worlds apart.
Path A: The Hormuz situation pushes up oil prices → July CPI rebounds → rate-hike expectations shift forward again → the risk-asset repair window closes, and BTC could retrace toward June’s lows.
Path B: Inflation keeps easing → rate-hike expectations unravel → BTC could see its second major leg higher within the year.
July’s CPI and August’s release—this one month is the market’s “Schrödinger moment.”
So what should you do now?
First, don’t chase upside. The Fed could fire “talking points” to pressure the market at any time—Worsh and Waller have already shown they can do it.
Second, every pullback is a chance to buy spot in batches, but the prerequisite is—can you withstand volatility?
Third, watch oil prices. It’s the leading indicator for July CPI, and also the trigger for the Fed’s next move.
“CPI is yesterday’s story—oil prices are tomorrow’s script.”
June’s CPI gave you a window, but how long the window stays open doesn’t depend on the data itself—it depends on the ship in the Strait of Hormuz.
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