July Fed rate-hike odds sink below 17% after softer CPI, lifting Bitcoin above $65,000

Odds of a Federal Reserve rate hike at the July meeting slid sharply after a cooler-than-expected U.S. inflation report, while crypto markets rallied. June's Consumer Price Index rose 3.5% year over year, below the 3.8% consensus estimate. Core CPI, which excludes food and energy, eased to 2.6% versus expectations of 2.8%. Following the release, the CME FedWatch Tool showed the probability of a 25-basis-point hike in July falling from about 46.5% to below 17%, reflecting a swift shift in near-term policy expectations. Rate cuts are still not seen as imminent. FedWatch data indicate markets are fully pricing in no cut in July, and the odds of a September cut dropped to 49.9% from nearly 76% before the CPI report. Even with July hike bets fading, traders continue to price in additional tightening later. Current probabilities imply a 59% chance of a hike in October and a 73.4% chance in December, suggesting investors expect the Fed to respond if inflation pressures reaccelerate. Officials offered differing takes. Fed Governor Christopher Waller said another increase remains possible if inflation picks back up. National Economic Council Director Kevin Hassett argued there is "no excuse" to raise rates after inflation undershot expectations and said recent policies have helped cool prices, adding that he believes the Fed is running out of reasons to keep restraining markets. Risk assets benefited from the softer data. Bitcoin climbed above $65,000, trading around $65,259, while Ethereum rose past $1,920. Lower inflation tends to support cryptocurrencies by easing pressure for tighter monetary policy.