The latest U.S. Consumer Price Index (CPI) report is out, and it’s generating a mixed reaction across political, economic, and crypto circles. Released on June 11, the data shows a year-over-year inflation rate of 2.4% for May slightly below economists’ expectations of 2.5%, and down from April’s 2.5%. While this technically marks the lowest CPI growth since February 2021, the report has only added to an already tense political standoff and fueled fresh speculation in financial markets.
Slower Inflation, but No Clear Victory
The Bureau of Labor Statistics confirmed that inflation is still growing, though at a slower pace. The core CPI, which excludes volatile food and energy prices, held steady at 2.8%, indicating that underlying inflation pressures remain.
Although the headline figure was slightly better than anticipated, the drop is only marginal just 0.1 percentage points below last month’s figure. For many analysts, this doesn’t justify immediate changes in monetary policy.
Trump vs Powell: Political Pressure Mounts
The inflation reading comes as part of a larger political storm involving former President Donald Trump and Federal Reserve Chair Jerome Powell. Trump has publicly attacked Powell, criticizing him for not cutting interest rates and pointing to recent rate cuts by the European Central Bank as proof of Powell’s failure.
On the surface, Trump’s call for lower rates seems tied to his tariff strategy. Although he temporarily froze newly announced tariffs for 90 days, fears remain that they could fuel inflation once enacted. Ironically, the May CPI suggests the impact of tariffs has not yet materialized in consumer prices.
Powell, however, has resisted calls to reduce rates, stressing that the Fed must maintain credibility and consistency. The Fed’s current policy aims to lower inflation to 2% or below, and premature easing could reverse hard-won progress.
Trump supporters have speculated about replacing Powell with Scott Bessent, the current U.S. Treasury Secretary and someone who has voiced support for Trump’s economic vision. While the Fed is independent and a sitting President cannot legally fire the Chair, speculation has added another layer of uncertainty to markets.
Is a Rate Cut Realistic?
Given the data, a rate cut in the near term appears unlikely. While inflation has cooled, it remains above the Fed’s target, and global trade uncertainty driven by U.S. tariffs introduces further risk. Cutting rates now, especially with inflation still above target and tariffs looming, would conflict with the Fed’s historical approach and policy rationale.
Moreover, some economists warn that tariffs could increase inflation later this year, making the Fed even more cautious about loosening policy too soon.
Crypto Reaction: Minimal, But Watch the Money Printer
The crypto market has been surprisingly quiet in response to the CPI report. In the past, high inflation typically boosted demand for Bitcoin (BTC) and other digital assets perceived as hedges against fiat devaluation. But this time, the signal is murky.
Market participants are divided some view the lower-than-expected CPI as a sign that inflation is under control, while others fear that when the tariff freeze expires, prices will spike again.
Should the Fed eventually decide that current interest rates are too restrictive, it may consider turning on the money printer instead of cutting rates outright. This would involve injecting more liquidity into the market an approach hinted at earlier this year by Fed official Neel Kashkari, who noted that the central bank still has tools at its disposal to stimulate the economy.
If that happens, Bitcoin and gold could rally as investors look to shield themselves from renewed currency debasement.
Final Thoughts
The May CPI has managed to stir political drama and financial speculation without providing clear direction. While the headline figure came in lower than expected, it’s not low enough to prompt immediate action from the Fed especially amid ongoing tariff threats and internal political pressure.
For now, crypto markets may continue to drift sideways, but any sign of monetary easing whether via rate cuts or balance sheet expansion could reignite bullish sentiment across digital assets.
