Lower-Than-Expected CPI Sparks Crypto Rally and Boosts Fed Rate-Cut Hopes
U.S. CPI inflation came in at 2.7% year-over-year in July, below expectations of 2.8% and unchanged from the previous month, fueling optimism for a September Federal Reserve rate cut. Monthly CPI eased to 0.2%, while core CPI rose to 3.1% — its highest in five months.
The data triggered a sharp rebound in crypto markets, with Bitcoin breaking above $119,000 and Ethereum surpassing $4,400. The total crypto market cap climbed from $3.9 trillion to $3.94 trillion after the release, led by gains in Bitcoin, Ethereum, XRP, and Solana. This comes after prices had dipped earlier in the day ahead of the CPI announcement.
Traders now see an 82.4% probability of a 25 bps rate cut in September, according to CME FedWatch, with only a 17.6% chance of rates remaining unchanged. Several FOMC members, including Michelle Bowman, have already voiced support for easing, while others, like Kansas City Fed President Jeff Schmid, caution against cuts to avoid stoking inflation.
