US inflation surges, Fed rate hikes expected

US inflation hit a three-year high in May, driven by energy and spending. Markets expect Fed rate hikes from September, increasing crypto market volatility.

US inflation surged to its highest level in over three years in May, primarily due to rising energy prices and robust consumer spending. The core personal consumption expenditures (PCE) price index increased by 0.3% month-over-month and 3.4% year-over-year, while headline PCE inflation reached 4.2%. Both consumer spending and personal income grew by 0.7%, exceeding expectations. However, the personal savings rate dropped to 2.6%, marking its lowest point since 2022. This suggests consumers are spending more despite diminishing savings. Market participants now anticipate that the Federal Reserve may begin raising interest rates as early as September, with major banks forecasting two to three hikes this year. These developments have heightened pressure on risk assets and increased volatility in the cryptocurrency market, especially as Bitcoin options near expiration and key support levels are tested.