The price of Bitcoin (BTC) reacted to the U.S. Consumer Price Index (CPI) data, which showed that inflation came in below targets in July.
This comes as tariffs from U.S. President Donald Trump continue to have an impact and could put the Federal Reserve (Fed) in a dilemma.
Inflation rose at an annual rate of 2.7% in July, according to the Consumer Price Index data
The U.S. Bureau of Labor Statistics (BLS) released the Consumer Price Index data on Tuesday, indicating that inflation in the United States rose at an annual rate of 2.7% in July.
This represents a similar reading to the inflation data reported in June, which BeInCrypto reported at 2.7%.
Although it came in lower than the expected 2.8%, this data indicates that inflation in the United States remains high. This highlights previous reports showing the high inflation component in the U.S. inflation basket rose to 40% in July 2025, the highest this year.
Data also shows that the share of Consumer Price Index components grew at a faster rate than 4%, indicating ongoing inflationary pressure despite the recent decline from a peak of 60% in 2022.
This combined data indicates that price pressures from tariffs have become more evident.
Bitcoin reacted to the U.S. economic signal, registering a slight increase to nearly $119,000. The calm response came as markets had already factored in the impact, given that the Consumer Price Index aligned with economists' expectations, easing concerns.
Similarly, the price of Ethereum rose, reaching the $4,400 mark after an increase of more than 5% in the past 24 hours. Data on CoinGlass shows a liquidation of $40 million in short ETH positions in the last 60 minutes.
As the cryptocurrency market digests the Consumer Price Index data, all eyes are on the Federal Reserve (Fed). Rate bettors see a 90% chance that policymakers will cut rates by a quarter basis point (bp) in September.
Before the release of the U.S. Consumer Price Index, the CME FedWatch tool showed an 84.4% probability of cutting interest rates to 4.00 to 4.25%, compared to a 15.6% chance of remaining steady at 4.25 to 4.50%.
Analyst Kyle Chass commented, "The market is no longer guessing... it's pricing that in."
The Consumer Price Index report today is significant ahead of next month's Federal meeting. With inflation at 2.7%, the chances of a rate cut in September remain high.
The Fed maintained a cautious outlook, keeping interest rates steady while the inflation target of 2% remains elusive.
However, despite the latest Consumer Price Index data, which still keeps them away from the 2% target, their firm stance may change amid fragility in the labor market, hence the dilemma.
The expectation for the Fed to cut interest rates in September comes after poor job data, which showed signs of weakness in the labor market. Despite rising inflation in the U.S., policymakers may have to cut rates in pursuit of their dual goal:
🔸Price Stability (Inflation Target 2%) and
🔸Maximum Employment.
In this context, analysts expect a limited reaction in the price of Bitcoin following the release of the Consumer Price Index data.
Analyst Paul Thiery wrote, "The Fed must cut rates in September due to poor job data, so the rise in the Consumer Price Index will not really affect the Fed's decision. A decrease in the Consumer Price Index will only provide more confidence."
Analyst Miles Deutscher echoed the same sentiment, stating that the Fed will generally cut interest rates in September.