US Inflation Cools Sharply as CPI Misses Forecasts, Boosting Gold and Raising Fed Rate Cut Hopes

Fresh US inflation data came in well below market expectations, increasing pressure on the US dollar while lifting gold prices. Core CPI remained flat at 0.0% month over month, missing the 0.2% forecast and slowing from the previous 0.2%. On an annual basis, Core CPI eased to 2.6%, below the expected 2.8% and down from 2.9%.

Headline inflation also surprised to the downside. Monthly CPI fell 0.4%, compared with expectations for a 0.1% decline, after rising 0.5% previously. Year-over-year CPI slowed to 3.5%, lower than the 3.8% forecast and the previous 4.2%.

Gold Surges as Rate Cut Expectations Increase

The weaker than expected inflation figures sparked a strong reaction across financial markets. The US dollar weakened as investors increased bets that the Federal Reserve could begin cutting interest rates sooner than expected. Gold responded with a rally of more than 200 pips, benefiting from lower Treasury yield expectations and a softer dollar.

$BTC responded with a rally of more than 1.2% on upside to $63,505.

Markets are now likely to focus on upcoming employment and inflation reports for confirmation that price pressures continue to ease. If inflation remains under control and economic growth slows further, the Federal Reserve could move toward its first rate cut in the coming meetings, supporting both gold prices and broader risk assets.