Inflation Data Matches Market Expectations

According to data from the U.S. Department of Labor, headline CPI rose 2.9% year-over-year, in line with expectations. Core CPI remained unchanged at 3.1%. On a monthly basis, headline inflation increased 0.4%, slightly above the forecast of 0.3%, while core inflation climbed 0.3%, right on target.

These softer inflation readings reinforced hopes for a Federal Reserve pivot. Prediction markets now assign an 88% probability to a 25 bps cut in September, while the likelihood of a deeper 50 bps cut has diminished significantly.

Fed’s Previous Move and the Road Ahead

The last time the Federal Reserve adjusted interest rates was on December 18, 2024, when it lowered the federal funds rate by 25 basis points to a target range of 4.25%–4.50%.

Attention now turns to the September 17 FOMC meeting, where analysts, including Goldman Sachs CEO David Solomon, expect another quarter-point reduction. Such a move is generally considered supportive of risk assets like Bitcoin.

Market Reactions: Bitcoin and Ethereum Stability

Following the data, price action across crypto markets remained steady.

• Bitcoin (BTC) traded within the $113,000–$114,000 range, a zone many analysts describe as a bullish threshold.

• Ethereum (ETH) hovered just above $4,400, reflecting similar resilience.

Market observers note that a daily close above $113,000–$113,500 could open the door to $118,000, while failure to break that range might bring support levels around $109,000–$107,000 into play.

Institutional Inflows Fuel Optimism

Institutional participation has been strong in recent sessions. On September 10 alone, spot crypto ETFs recorded $757 million in net inflows to Bitcoin funds and $172 million to Ethereum products.

Analysts suggest that continued moderation in inflation could amplify risk appetite. One market expert highlighted that sustained inflows combined with easing monetary policy could strengthen the case for higher crypto valuations.

Expert Insights: Rate Cuts as a Crypto Catalyst

Paul Howard, senior director at crypto market maker Wincent, pointed out that traders are now pricing in up to 75 basis points in cumulative cuts by Q1 2026. He argues that lower interest rates will inject fresh liquidity into markets, a scenario that often benefits Bitcoin as a hedge against inflation.

“Rate cuts will allow hot money to flow back into risk assets. This dynamic could reinforce Bitcoin’s role as an inflation shield and drive its price higher in the coming quarter,” Howard explained.

*Not Investment Advice!

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The data came in slightly below expectations, indicating that the US labor market continues to show strength. This marks the second consecutive week of declining jobless claims.

Why Are US Jobless Claims Important?

This weekly data, which shows the number of individuals applying for unemployment insurance for the first time, is considered an important indicator of the health of the labor market. A decrease in claims suggests fewer layoffs and a resilient employment environment.

With the release of this week’s data:

• Expectations: 246K

• Previous Week: 250K

• Actual: 245K

What Do the Fed and Markets Think?

Inflation data released in May has shifted investors’ focus back to the possibility of a rate cut expected in September. The Consumer Price Index (CPI) rose only 0.1% on a monthly basis, falling short of expectations, while annual inflation came in at 2.4%, also below economists’ forecast of 2.5%. This soft inflation reading has strengthened expectations that the Fed may begin cutting interest rates in the second half of the year.

According to CME Group data, the probability of a rate cut in September has risen to 76%.

You May Be Interested: When Will the FED Cut Interest Rates? Pressure on Powell is Increasing!

However, this process is not shaped solely by economic indicators. President Donald Trump has escalated his criticism of Fed Chair Jerome Powell. Trump, calling Powell a “numbskull,” argued that a 2-point rate cut would save the US economy $600 billion. He also hinted that he might intervene if necessary. Several members of his administration echoed these sentiments—both the Secretary of Commerce and the Vice President voiced support for Trump’s position, stating that “the Fed must cut rates.”

So far, markets have remained calm in response to these statements. However, the growing political pressure is being closely watched in terms of the Fed’s independence and the decisions Powell will make in the coming period.

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