Breaking: US CPI Inflation Comes in at 2.7%, Will the FED Cut Rate in September?

Key Insights:

• The US CPI inflation year-over-year for July remained at 2.7% but Core CPI inflation rose higher to 3.1%.
• The Federal Reserve could resume rate cuts in September, but the PCE data remained key.
• Bitcoin and Ethereum prices resumed upside momentum after the CPI release, but experts warned about possible bearish market pressure.

The headline US CPI inflation in the United States remained at 2.7% after rising for two consecutive months. This could influence the U.S. Federal Reserve to resume the interest rate cuts in September, while US President Donald Trump pushes for tariffs.

Bitcoin price slightly rebounded on Tuesday, but traders braced for headwinds, including rising inflation, bearish technical patterns, and seasonal weakness. Ethereum price jumped above $4,400 after the key CPI release.

Will BTC and ETH prices drop further in response to the Fed skipping the much-anticipated rate cut in September?

US CPI Inflation Comes in Lower Than Expected at 2.7%

On August 12, the U.S. Bureau of Labor Statistics released the Consumer Price Index (CPI) inflation data for July. This was considered the most crucial release by many experts for cues on whether the Fed rate cut resumes in September.

The monthly US CPI for July comes in line at 0.2%, down from 0.3% in the previous month. Moreover, the headline CPI inflation remained unchanged at 2.7% against the expected 2.8% and lower than the hotter 2.7% CPI Inflation in the prior month.

Whereas, the Core CPI, excluding the food and energy prices, increased to 0.3% from the 0.2% print in the prior month. Also, the Core CPI on a YoY basis comes in at 3.1% for July against the expectation of 3% and up from a 2.9% print in June.

At the time of writing, the CME FedWatch showed more than 93% probability of a Fed rate cut by 25 bps in September. Moreover, bond traders also expect the odds of three rate cuts this year.

Wall Street giants estimated the headline CPI inflation to rise between 2.7%-2.8%. JPMorgan, Bank of America, BNP Paribas, Goldman Sachs, Morgan Stanley, and others predicted a 2.8% headline CPI reading.

At the time of writing, the US dollar index (DXY) showed volatility and fell to 98.40 from 98.60. Also, the 10-year US Treasury yield slipped lower at around 4.265% after the key US CPI economic data release.

Bitcoin and Ethereum Prices Rebound

Bitcoin price recovered some losses and rebounded above the $119,200 level at the time of writing. The 24-hour low and high were $118,159 and $122,603, respectively.

However, the trading volume drop expanded to 13% over the last 24 hours, indicating muted trading activity in the spot crypto market.

Headwinds such as bearish technical patterns, seasonal weakness, and slowing inflows into Bitcoin investment products persist for BTC. This would boost altcoins’ appeal to investors.

Meanwhile, Matrixport pointed out $116,817 as the key support level to watch if its Bitcoin price action weakened again. BTC price’s spike above $122K formed a double top bearish reversal pattern, which would make selling pressure remain high in the coming weeks.

Meanwhile, Ethereum price jumped nearly 3% after the US CPI data, extending the 24-hour run to more than 5%. The price was trading at $4,401, with a 24-hour low and high of $4,172 and $4,424, respectively.

Furthermore, the trading volume climbed by 24% in the last 24 hours, indicating a rise in interest among traders.