Crypto Rally on Cooling CPI: Bitcoin and ETH Edge Up as September Fed Cut Odds Rise

I note U.S. consumer prices rose 2.7% year over year in July, a touch cooler than forecasts, while core CPI — which excludes food and energy — accelerated to 3.1%, a bit above expectations, according to Labor Department data. On a monthly basis, headline CPI climbed 0.2% and core CPI increased 0.3%, both matching estimates.

After the print, bets on rate cuts firmed: the CME FedWatch showed the probability of a September cut moving above 93%, up from roughly the low 80s before the release. Market participants appeared to lean toward easier policy despite the stickier core inflation print.

Crypto reacted quickly to the data, with prices bouncing in the hour after the release. I observed Bitcoin and ether tick higher as traders likely interpreted the softer headline reading and stronger odds of near-term easing as bullish for crypto assets.

Still, a dovish pivot from the Federal Reserve is not guaranteed. Fed Chair Jerome Powell has stressed the Fed’s focus on 12-month inflation, so the rise in core CPI remains a meaningful concern even as headline pressure cools.