Bitcoin Rallies as Softer U.S. Inflation Boosts Hopes for Fed Pause
Bitcoin surged toward $64,800 on Wednesday, marking its strongest performance in several weeks after fresh U.S. inflation data came in lower than expected. The report fueled optimism that the Federal Reserve is less likely to raise interest rates in the near term, triggering gains across cryptocurrencies, stocks, and other risk assets.
The latest inflation figures showed headline consumer inflation slowing to 3.5% in June, down from 4.2% a month earlier. Core inflation, which excludes volatile food and energy prices, also cooled to 2.6% from 2.9%, suggesting that price pressures are easing more broadly across the economy.
The softer inflation reading quickly reshaped market expectations. Traders sharply reduced their forecasts for a Federal Reserve rate increase this month, while yields on short-term U.S. government bonds declined as investors anticipated a less aggressive monetary policy.
Bitcoin responded with a strong rally, climbing 3.6% over the past 24 hours and extending its weekly gain to 3.3%. Trading activity remained elevated, with roughly $31 billion worth of Bitcoin changing hands during the period.
Ethereum outperformed the broader crypto market, rising 5.3% on the day to nearly $1,880, bringing its seven-day gain to more than 7%.
Several major altcoins also posted notable advances. Hyperliquid's HYPE token gained 6.4% to reach $67, while XRP added 3.7% to trade around $1.10. Solana climbed 3.6% to $78, Dogecoin rose 2.9%, and BNB increased 1.9% to approximately $579.
Interest rate expectations remain one of the biggest drivers of cryptocurrency prices. When borrowing costs rise, investors often shift money into assets such as Treasury bonds that offer higher guaranteed returns. That tends to reduce demand for more volatile investments like Bitcoin, which does not generate income.
Conversely, signs that inflation is cooling reduce the urgency for additional rate hikes, improving the outlook for risk assets. As expectations for tighter monetary policy fade, capital often flows back into markets such as cryptocurrencies and equities.
Traditional financial markets also reacted positively to the inflation report. The MSCI Asia Pacific Index climbed 2.3%, its strongest daily performance in about a month, led by technology stocks. South Korea's Kospi Index surged 8.2%, reclaiming its position as the world's best-performing major equity benchmark this year. Chipmaker SK Hynix also posted strong gains after its U.S.-listed shares rallied sharply.
Meanwhile, energy markets continued to move in the opposite direction. Brent crude oil rose another 1% to trade above $85 per barrel, extending a three-day winning streak. Oil prices have jumped roughly 11% over the past two sessions after President Donald Trump threatened additional military action against Iran and the U.S. resumed its blockade of Iranian shipping through the Strait of Hormuz.
Despite the latest rally, inflation remains above the Federal Reserve's long-term 2% target. That suggests policymakers still have reason to keep interest rates elevated, even if another immediate increase appears less likely.
Investors are now expected to focus on upcoming economic data and the Federal Reserve's next policy meeting for further clues about the direction of interest rates. The performance of the U.S. dollar, continued demand for spot Bitcoin ETFs, and broader macroeconomic conditions are also likely to play a significant role in determining whether Bitcoin can build on its recent momentum.