TLDR
- July CPI came in at 2.7% year-over-year, matching forecasts, while core CPI exceeded expectations at 3.1%
- Bitcoin rose to near $119,000 after the data release, trading close to its record high of $123,166
- Federal Reserve rate cut odds for September jumped from 84% to 94% following the inflation report
- Total cryptocurrency market cap climbed back above $4.1 trillion as digital assets rallied
- Ethereum gained 7% to $4,623 while other major cryptocurrencies posted strong gains across the board
Bitcoin and other major cryptocurrencies surged on Wednesday after July inflation data came in line with expectations, raising hopes for a Federal Reserve interest rate cut next month. The consumer price index report showed headline inflation holding steady at 2.7% year-over-year, matching forecasts and keeping the Fed’s easing path intact.
BREAKING: July CPI inflation was unchanged, at 2.7%, below expectations of 2.8%.
Core CPI inflation rises to 3.1%, above expectations of 3.0%.
Core CPI inflation is now above 3.0% for the first time since February 2025.
The Fed is in a tough spot.
— The Kobeissi Letter (@KobeissiLetter) August 12, 2025
Bitcoin traded near $119,000 following the data release, just 3% below its record intraday high of $123,166 reached in mid-July. The world’s largest cryptocurrency gained 0.3% over 24 hours as traders positioned for potential monetary policy changes.
The July CPI reading met economist expectations at 2.7% annually, unchanged from June’s rate. Monthly CPI increased 0.2%, slower than the previous month’s 0.3% gain and in line with predictions.
Core CPI, which excludes volatile food and energy prices, rose 3.1% year-over-year. This exceeded the expected 3% and marked an acceleration from June’s 2.9% rate.
On a monthly basis, core CPI gained 0.3%, matching forecasts but faster than June’s 0.2% increase. Despite the mixed core reading, markets focused on the stable headline inflation figure.
Market reaction was swift across asset classes. U.S. stock index futures climbed about 0.6% for both the Nasdaq 100 and S&P 500 after the release.
The dollar weakened while the 10-year U.S. Treasury yield dropped three basis points to 4.26%. These moves reflect market expectations that the data maintains the path for monetary easing.
Fed Rate Cut Odds Jump to 94%
Market-implied odds for a September Federal Reserve rate cut increased from 84% to 94% within fifteen minutes of the data release. Traders viewed the stable headline inflation as removing a key barrier to monetary policy easing.
The data comes after weaker labor market figures earlier this month that had already positioned markets for potential rate cuts. The Federal Reserve now faces a situation where headline inflation remains contained while core measures show some persistence.
Lower interest rates typically make risky assets like cryptocurrencies more attractive relative to bonds and other traditional investments. This dynamic has helped fuel the recent crypto rally.
Crypto Market Strength Continues
The total cryptocurrency market capitalization recently crossed back above the $4 trillion mark, signaling increased investor confidence. Ethereum, the second-largest cryptocurrency, jumped 7% to $4,623 following the inflation data.
Other major digital assets posted strong gains across the board. XRP rose 2.3%, Solana gained 12%, and Dogecoin was up 6% according to Kraken exchange prices.
Bitcoin currently trades less than 5% from its recent all-time high. The cryptocurrency has benefited from the same momentum pushing up traditional stocks after the consumer price index came in weaker than some feared.
Prior to the CPI release, traders had positioned for potential downside through short-dated put options on Bitcoin. The modest upward move following the data suggests markets found comfort in the inflation picture.
Crypto-focused companies also stand to benefit from the rally. Shares of companies like MicroStrategy and GameStop, which have made Bitcoin purchases part of their business strategy, could see continued interest.
Trading platforms Coinbase Global and Robinhood Markets have also benefited from rising crypto prices and increased trading activity. The Bureau of Labor Statistics will release the next CPI reading for August on September 11, 2025.
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