The latest U.S. Producer Price Index (PPI) data has shown a significant cooling of inflation in May, sparking optimism in the market about a potential dovish stance by the Federal Reserve. Will this trigger a Bitcoin price rally?

The U.S. PPI inflation data for May showed a 0.2% drop, the largest since October 2023, while the market was expecting a 0.1% surge. This cooling inflation data has fueled market confidence, but the latest remark from Fed Chair Jerome Powell has dampened hopes, signaling only one rate cut in 2024.

The Bureau of Labor Statistics reported that the U.S. PPI inflation fell 0.2% in May after soaring 0.5% in April. This marks the largest drop since October last year. On an unadjusted basis, the inflation cooled to 2.2% in May compared to 2.3% in the prior month. The market was expecting the annual PPI inflation to come in at 2.5%.

The Core PPI, excluding food, energy, and trade services, remained unchanged from the prior month. The core PPI annual rate in May eased to 2.3% compared to the 2.4% figure noted in April. The market was also expecting the Core PPI annual rate to come in at 2.4%.

Despite the cooling U.S. PPI inflation data, the market is taking a cautious approach as it still stays above the Fed’s target range. The recent Fed Chair’s comment appeared to have weighed on the investors’ sentiment.

Bitcoin has noted a strong recovery following yesterday’s cooling U.S. CPI inflation data. However, despite today’s data signaling that the U.S. PPI inflation has also cooled, the market faces heightened volatility. According to market experts, investors are seeking further clarity before putting their bets into the sector.