Morgan Stanley’s Matt Hornbach said Tuesday’s US consumer price index release is likely to be a “spicier” inflation reading and represents the first in a set of reports that will feed into the Federal Reserve’s preferred inflation gauge, the personal consumption expenditures index.

He said CPI, producer prices, and import prices collectively shape the Fed’s inflation assessment.

Hornbach noted that the Fed will evaluate this data set ahead of its June 16–17 policy meeting, with markets showing some sensitivity as reflected in rising Treasury yields. Morgan Stanley expects the Fed to remain on hold throughout the year based on its current outlook.

Why this CPI print matters more than usual

Beyond Tuesday’s CPI, markets will also digest producer price data and eventually the Fed’s preferred inflation gauge, the Personal Consumption Expenditures index. The consensus view heading into Tuesday has core CPI, which strips out volatile food and energy prices, rising 0.3% month-over-month. If the actual print lands above that 0.3% mark, the conversation around rate cuts shifts meaningfully, potentially pushing rate cut expectations into late 2026 or beyond.

The crypto connection: history rhymes

In January 2025, following a strong jobs report that shifted Fed rate expectations, Bitcoin dropped below $93K as inflation concerns mounted. The mechanism is simple: stronger economic data or hotter inflation reduces the odds of rate cuts, which makes risk assets less attractive relative to yield-bearing instruments like treasuries.

When a soft CPI report landed in August 2025, Bitcoin climbed 1% and ether surged 8%. That divergence between the two largest crypto assets suggests ether tends to be more sensitive to macro sentiment shifts.

What investors should watch

The headline CPI number will grab attention, but the details inside the report matter just as much. Shelter costs, which have been stubbornly sticky, are a key component to monitor. If core CPI hits 0.4% or higher, that would represent a meaningful acceleration and could push rate cut expectations into late 2026 or beyond.

For crypto traders specifically, the minutes immediately following the 8:30 AM ET release tend to produce the sharpest moves. Liquidity thins out as market makers widen spreads, and leveraged positions get flushed in both directions before a trend establishes itself.

Beyond Tuesday, the producer price index and upcoming PCE data will either confirm or contradict the CPI signal. A consistently hot set of inflation readings across all three measures would be significantly more bearish for risk assets than a single elevated CPI print.