Latest Inflation Data Falls Short of Forecasts – But Triggers Political and Market Drama
On June 11, 2025, the U.S. Bureau of Labor Statistics released May’s Consumer Price Index (CPI) data, reporting a year-over-year inflation rate of 2.4%. Although this marks a 0.1% increase from April, it remains below market expectations of 2.5%. While the number technically shows inflation is rising, the slower-than-expected pace has reignited public and political debate about the Federal Reserve’s next move on interest rates – and how it might affect the volatile cryptocurrency market.
This CPI reading marks the lowest annual inflation growth since February 2021 and appears to be a signal that inflation is broadly under control. But opinions remain split. For some, this is a bullish green light for asset markets like crypto. For others, the picture is more complex, particularly given the renewed pressure on Fed Chair Jerome Powell from Donald Trump and his economic circle.
Core Inflation and Economic Sentiment Remain Mixed
While headline inflation dipped below forecast, core inflation, which strips out food and energy prices, remained stable at 2.8%, the same level as April. This suggests that, beneath the surface, pricing pressures still exist across other sectors of the economy. The Federal Reserve is keenly aware of this discrepancy and has made it clear it won’t rush into cutting rates without further evidence of sustainable deflation.
Nonetheless, public sentiment is starting to shift. A growing chorus of political voices, led by former President Donald Trump, is calling on the Fed to slash rates. Trump has pointed to rate cuts in Europe by the European Central Bank (ECB) as an example that the Fed should follow. On social media, some of Trump’s supporters have gone as far as suggesting Powell should be removed, though legally, that’s unlikely, given the Fed’s independent mandate.
Adding fuel to the fire, Trump recently froze a batch of newly enacted tariffs for 90 days—a move that many believed would push inflation higher. Yet the data has defied expectations. Supporters are now claiming this is proof that Trump’s economic approach is working, while Fed insiders maintain a more cautious view.
Trump vs. Powell: Rate Cut Demands, Tariffs, and the Fed’s Dilemma
Trump’s pressure campaign on the Fed has entered a new phase. With inflation trending downward and economic growth slowing, Trump argues that the Federal Reserve should stimulate the economy by cutting rates, thereby weakening the U.S. dollar and making American exports more competitive, even in the face of elevated tariffs.
However, Chair Jerome Powell and his team are holding their ground. The Fed has made it clear: the path to its 2% inflation target is not yet complete, and preemptive cuts could undo the progress achieved since 2023. After all, it was aggressive rate hikes that helped bring inflation down from over 7% to its current range in just two years.
Moreover, the specter of tariffs continues to haunt Fed policy meetings. While the recent 90-day tariff freeze has momentarily cooled price pressures, economists warn that tariffs tend to have a delayed inflationary effect. As such, any premature rate cuts could backfire if inflation spikes again once the tariff pause ends.
U.S. Treasury Secretary Scott Bessent, a known Trump ally, added fuel to the speculation by stating that the inflation drop is due to Trump’s policies, not the Fed’s. He is also rumored to be a potential replacement for Powell if Trump regains the presidency – a scenario that would dramatically shift the tone of U.S. monetary policy.
Crypto Markets React Cautiously Amid Rate Uncertainty
So, what does all this mean for crypto markets? At first glance, the news appears mixed. Bitcoin, often viewed as a hedge against inflation and monetary instability, typically benefits when inflation fears rise or when the Fed prints more money. Yet with inflation slowing and no immediate sign of rate cuts, Bitcoin’s trajectory remains uncertain.
Some investors interpret the CPI miss as a sign of economic softness, which could eventually lead the Fed to resume money printing – a potential bullish scenario for Bitcoin and gold. In fact, Fed official Neel Kashkari hinted earlier this year that the Fed “still has tools” to support the economy if necessary. Many interpreted this as a nod toward potential quantitative easing (QE) if conditions worsen.
If the Fed chooses to print money instead of cutting rates directly, we could witness another surge in crypto prices, particularly in Bitcoin, Ethereum, and inflation-resistant altcoins. However, if the Fed sticks to its hawkish stance and keeps rates elevated, speculative assets could see muted performance in the short term.
For now, crypto markets are showing restrained optimism. The lack of a unified market reaction to the inflation report and the ongoing standoff between Trump and Powell, means investors are in a holding pattern. Some traders are waiting for confirmation that the Fed will pivot, while others are watching for signs of fiscal stimulus or renewed QE.
Inflation Is Cooling, But the Fed Won’t Blink Yet
Despite the below-expected CPI numbers, the Federal Reserve is unlikely to cut rates immediately. Trump’s political campaign to pressure Powell into easing monetary policy is facing resistance, and for good reason. Cutting rates now, when inflation is still above the Fed’s 2% target, would contradict years of carefully coordinated policy tightening.
The bigger takeaway? Crypto markets may remain range-bound in the near term, but the macro environment is ripe for potential upside. If the Fed eventually concedes to political pressure or finds itself forced into liquidity measures, Bitcoin and other digital assets will be among the first to benefit.
Until then, savvy investors will continue watching the Fed’s every word – because in today’s macro-driven crypto world, interest rates aren’t just a fiat problem. They’re a blockchain opportunity.
