Benjamin Cowen breaks down the latest CPI report and its potential effects on rate cuts, inflation trends, and investor sentiment.
Key Inflation Numbers
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Headline CPI: 2.38% (rounded to 2.4%), slightly higher than last month but lower than the expected 2.5%
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Core CPI: Continues to decline, now at 2.77% from 2.78% the prior month
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Inflation is still trending down overall, despite a minor monthly uptick
The Fed Is Still Holding Off
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The next interest rate cut is likely in September
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CME Group data shows only a 3% chance of a cut in June and a 22% chance in July
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Rising unemployment over the summer could influence cuts, but for now the Fed remains cautious
Main Drivers of Inflation
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Housing and food & beverages are doing the heavy lifting in the CPI number
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Other categories like transportation and apparel are now deflationary
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If housing inflation drops, headline CPI could fall significantly, since housing makes up a large portion of CPI
Tariffs Add Uncertainty
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Tariffs may cause short-term inflation spikes, but Benjamin believes any such increase would be brief
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He still leans toward a disinflationary outlook, backed by high interest rates and tight monetary policy
Comparing to the Past
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Inflation one year ago was 3.24%, two years ago it was 8.53%
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Despite small bumps, the overall trend is clearly downward
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Talk of a 1970s-style inflation resurgence seems unlikely at this stage, though tariffs introduce risk
Final Thoughts
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The base case remains: a rate cut in September, likely following a small rise in unemployment
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The biggest concern is whether tariff fears delay rate cuts, even if inflation is under control
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For crypto, midterm years (like 2026) are historically weaker, so timing around monetary policy matters
