Fed's Rate Cut Expectations Remain High Despite CPI Report and Core Inflation Above 3%

Recent analysis suggests that the Federal Reserve may not be ready to cut interest rates despite some encouraging inflation data. Core inflation remains above 3%, which analysts believe indicates that the Fed lacks the necessary signal to initiate rate cuts. Market expectations are high, with some anticipating a reduction in the target federal funds rate to a range of 3.25% to 3.5% over the next 12 months, down from the current range of 5.25% to 5.50%. However, experts, including Mohamed El-Erian, argue that these expectations are overly aggressive. Meanwhile, crypto analysts are more optimistic, suggesting that easing inflation could lead to increased liquidity in the market, making speculative assets like Bitcoin more attractive. Analysts from Bitfinex also noted that a dovish shift in monetary policy would be positive for risk assets, including Bitcoin. Ed Yardeni from Yardeni Research predicts a potential rate cut of 25 basis points in September, further highlighting the mixed sentiments surrounding the Fed's monetary policy direction.