Bitcoin, ETH bounce as US inflation cools, boosting odds of September Fed cut

U.S. consumer prices rose 2.7% year over year in July, a touch cooler than forecasts, while core CPI — which strips out food and energy — accelerated to 3.1%, slightly above expectations, according to data from the Labor Department on Tuesday. Monthly headline CPI increased 0.2% and core CPI 0.3%, matching estimates.

Rate-cut bets firmed after the print. The CME FedWatch showed the probability of a September cut at over 93%, up from roughly the low 80s before the release, as traders leaned toward easier policy despite stickier core inflation.

Crypto prices bounced in the hour after the data. Bitcoin and ether edged higher, as traders likely regarded the softer headline reading and firmer odds of near-term easing as bullish.

Yet, a dovish pivot from the Federal Reserve is far from certain. Fed Chair Jerome Powell has emphasized the central bank is focused on 12-month inflation, making the uptick in core a potential concern even as headline pressure cools.

Odds of a September Fed rate cut rise over 93%. Image: CME FedWatch

Macro takes

Ahead of the release, Bitfinex analysts told The Block that CPI and PPI would be pivotal for crypto because of the “close relationship between ETF flows and macro outcomes” this cycle. They said a clean print could help bitcoin “break above range highs toward new all-time highs,” while a miss risked a retest toward $110,000. The team added that structural demand from corporate treasuries and passive buyers continues to underpin the market, even as near-term volatility clusters around data days.

Jake Kennis, senior research analyst at Nansen, added that persistent inflation would keep policy risks in play and could inject volatility for BTC and ETH, both trading just below recent peaks. He noted “smart-money” flows rotating into stablecoins over the past month alongside targeted alt exposure, a stance consistent with positioning for data-driven swings.

Investors now likely turn to producer-price figures later this week and to Fed communications for clues on whether July’s mix — cooler headline, hotter core — meaningfully alters the path to a September move.

Analysts also said markets would watch whether improving macro odds translate into sustained spot ETF inflows rather than just a post-print pop. Bitcoin tracked closer to $120,000 while ETH rose over 2% to trade above $4,400 after the July inflation report, The Block’s price page shows.

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