TLDR
- July CPI rose 2.7% year-over-year, matching forecasts, while core CPI increased 3.1%, higher than expected 3%
- Bitcoin traded near $119,000 following the data release with modest gains
- Market odds for September Fed rate cut increased from 84% to 90% after the data
- Total cryptocurrency market value climbed back above $4.1 trillion threshold
- Stable inflation removes key obstacle for Federal Reserve rate cuts despite mixed core numbers
The July Consumer Price Index data released by the Bureau of Labor Statistics delivered mixed signals to financial markets. The headline CPI rose 2.7% year-over-year, matching both economist forecasts and the previous month’s reading.
However, the core CPI reading, which excludes volatile food and energy prices, increased 3.1% annually. This exceeded the expected 3% and marked an acceleration from June’s 2.9% rate.
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
On a monthly basis, CPI gained 0.2%, in line with predictions and slower than June’s 0.3% increase. Core CPI rose 0.3% month-over-month, matching forecasts but faster than June’s 0.2% gain.
Market reaction was swift across asset classes. Bitcoin, which traded near $118,500 before the release, rose modestly to just under $119,000 in the immediate aftermath.
Traditional markets showed positive momentum following the data. U.S. stock index futures climbed about 0.6% for both the Nasdaq 100 and S&P 500.
The dollar weakened following the release while the 10-year U.S. Treasury yield dropped three basis points to 4.26%. These moves reflect market expectations that the mixed data maintains the path for monetary easing.
Federal Reserve Rate Cut Expectations Rise
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.
JUST IN 🚨: The odds of a September rate cut have soared to over 94% pic.twitter.com/E8copNJVuO
— Barchart (@Barchart) August 12, 2025
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.
For cryptocurrency markets, the timing coincides with renewed strength across the sector. The total cryptocurrency market capitalization recently crossed back above the $4 trillion mark, signaling increased investor confidence.
Bitcoin currently trades less than 5% from its recent all-time high near $119,800. Ethereum has maintained trading within a narrow range of its own peak levels during this period.
Crypto Market Positioning
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 mixed but not alarming inflation picture.
The cryptocurrency market’s proximity to record levels during a period of potential monetary easing creates conditions that historically have preceded sharp breakouts in digital assets. Market participants are watching for signs of capital rotation from Bitcoin and Ethereum into smaller market cap tokens.
Trading volumes and institutional interest remain elevated as markets process the implications of stable headline inflation alongside persistent core price pressures. The Bureau of Labor Statistics will release the next CPI reading for August on September 11, 2025.
