Markets
US CPI Rises By 3.4%, Bitcoin Price Continues To Hover Under $65,000
Bitcoin barely reacted to cooler CPI data, leaving traders watching the dollar and Fed expectations for the next major market catalyst.
31d ago 4,280
BLOCKINSIDERLoadingBitcoin barely reacted to cooler CPI data, leaving traders watching the dollar and Fed expectations for the next major market catalyst.
The US Consumer Price Index (CPI) rose by 3.4% YoY in July, coming in slightly under the 3.5% growth noted in June. Analysts had forecasted a 3.4% rise in July anyway, which makes the data priced in.
The immediate response was a 0.39% drop in Bitcoin’s price; however, this has no bearing on BTC as such. This is because BTC recovered this drop within minutes. The macro outlook, however, is still the same as the crypto king stands under $65,000, awaiting stronger cues to push upwards.
The CPI cooling down in July has been a major point of concern for investors across the world, as it would determine the Fed’s next move. Coming in at 3.4% per forecasts, the chances of a rate hike during the September FOMC meeting are low.
Bill Adams, Chief Economist at Comerica Bank, had already stated that this cooler CPI was likely the only outcome.
“CPI and PPI inflation are both forecast to be slightly cooler in July, helped by stable petroleum product prices. Core CPI also likely improved on benign shelter inflation. If these data come in as expected, they will bolster the case for the Fed to refrain from hiking at their next decision on September 16."
Jason Pride (Chief of Investment Strategy & Research) and Michael Reynolds (VP of Investment Strategy), Glenmede, added to this notion, saying,
"The Fed has the luxury of seeing two inflation reports before its next meeting, giving policymakers more time to assess whether energy pressure stays contained or starts broadening, a distinction likely to shape the future path of policy."
At the time of the previous FOMC meeting, towards the end of July, the market predicted a rate hike in September. Forecasts of a 25 bps increase in US interest rates stood at 67%, while there was a 33% chance of the rates staying as they are.
However, leading up to the CPI data release, and following the same, these forecasts have changed drastically.
The market has swung wildly, now favoring no change in the rates, expecting it to remain at 3.50% - 3.75%. While prediction for the same stands at 57.9%, the chances of an increase in rate have dropped drastically to 42.1%.
Joe Brusuelas, Chief Economist at RSM, gave his views on what an in-line print would mean for the Fed's September decision, stating,
"If we get a July CPI report anywhere near my forecast, the balance of the committee is going to look right through the supply shock, and the FOMC will remain on hold for the remainder of the year."
Beth Hammack, Cleveland Fed President, expressed hope that the Federal Reserve would work towards its goal of bringing inflation down to 2%.
“Now is the time to act. The longer we wait to take action to bring inflation back to our 2 percent objective, the more challenging it will be to bring it back down and the more expensive it will be for the American people.”
While the Nasdaq and S&P 500 Indexes are yet to open for trade, an early sign from the US Dollar Index is visible. DXY noted a 0.19% drop following the CPI data release, which was expected as it would have signaled a dovish repricing in Fed rate hike.
This is good for risk assets like Bitcoin and other crypto tokens, as cooling inflation is read as good news for growth/equities without forcing the Fed's hand.
As a result, capital often rotates out of the dollar (seen partly as a safe-haven/high-rate asset) into risk assets. equities, crypto, and higher-beta currencies.
As is, risk assets have shown an inverse correlation with the dollar index through much of 2026. Gold and Silver had a bearish reaction to the report as well, each falling over 1% before noting recoveries to pre-CPI levels.
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