TLDR
- U.S. CPI hits 2.7% in July, lower than expected, boosting market optimism.
- Bitcoin and Ethereum prices surged after CPI data, rising to new highs.
- The market expects a 90% chance of a 0.25% Fed rate cut in September.
- Core CPI rose 3.1%, indicating persistent inflationary pressure despite overall slowdown.
The latest U.S. Consumer Price Index (CPI) data has been released, showing a 2.7% year-on-year increase for July. This result, lower than the expected 2.8%, has had a positive effect on the cryptocurrency market, as investors anticipate a possible interest rate cut by the Federal Reserve. Following the release, major cryptocurrencies such as Bitcoin and Ethereum experienced notable price increases, fueling optimism about future market trends.
U.S. CPI Data Shows 2.7% Increase, Positive Impact on Crypto Market
The U.S. Bureau of Labor Statistics reported that inflation increased by 2.7% in July compared to the previous year. This figure matches the previous month’s data and came in below economists’ expectations of a 2.8% rise.
Monthly inflation showed a slower increase of 0.2%, down from 0.3% in June. While core CPI, which excludes food and energy costs, rose by 3.1%, it was still within a manageable range. The better-than-expected headline CPI number provided a boost to financial markets, including the crypto sector.
US #CPI came in at 2.7%, lower than expected.
This is exactly the kind of data the Fed wants to see before moving toward rate cuts.
Lower inflation eases pressure on liquidity, supports risk on assets, and historically has given Bitcoin room to rally.
If this trend continues,… https://t.co/4TvzpDFgC1
— CryptoNation (@CryptonationN) August 12, 2025
Core CPI, which is often used to assess underlying inflation, increased more than anticipated. This signaled that inflationary pressures remain despite some easing in specific sectors, such as gasoline prices. However, the overall CPI data pointed to slower inflation, which many saw as a positive sign for the Federal Reserve’s next policy decision.
Crypto Market Sees Significant Gains Following CPI Release
Following the release of the CPI data, the crypto market saw a sharp upward movement. Bitcoin, which had been trading lower earlier in the day, surged above $119,000, reflecting investor optimism.
Ethereum also saw strong gains, breaking above $4,400 after hitting an intraday low of $4,172. Other major cryptocurrencies such as XRP and Solana followed suit, contributing to a significant rise in the total crypto market capitalization.
The positive reaction in the crypto market stems from expectations that the Federal Reserve may lower interest rates in the coming months. A lower rate environment typically encourages investment in higher-risk assets like cryptocurrencies.
Given that the CPI data has alleviated inflation concerns, market participants are increasingly betting on a rate cut by the Fed at its upcoming September meeting. This sentiment has led to an overall positive outlook for the crypto sector.
Rate Cut Expectations Rise as Fed Faces Inflation and Labor Market Challenges
The release of the 2.7% CPI data has raised expectations that the Federal Reserve may lower interest rates as early as September. The probability of a 0.25% rate cut now stands at 90%, according to the CME FedWatch Tool, up from 57% last month.
This expectation is based on several factors, including the cooling inflation data and signs of a weakening labor market. While the Fed’s inflation target remains 2%, the latest data indicates that the central bank may have to reconsider its current stance, especially with job growth slowing.
In recent months, the labor market has shown signs of weakening, and the Fed may take this into account when deciding on future rate hikes or cuts. With inflation remaining above the 2% target, the Fed faces a delicate balancing act.
However, the improved CPI data has allowed the market to hold out hope for more accommodative monetary policies in the near future. This has sparked renewed interest in risk-on assets like Bitcoin, which benefits from a more favorable economic environment.
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