🚀 Bitcoin & Ethereum Surge as Tame US Inflation Sparks Fed Rate Cut Frenzy

Crypto markets erupt as inflation cools—traders pile into digital gold ahead of expected monetary easing.

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Fed Division and Market Response

The release followed a split Federal Reserve meeting last week. Two governors pushed for an immediate rate cut, the first such division since 1993. The Fed has held rates steady for five straight meetings, wary that President Donald Trump’s tariffs could reignite inflation.

Moreover, recent labor data added to pressure on policymakers. A weaker jobs report earlier this month revealed 258,000 fewer jobs than previously reported for May and June. After Tuesday’s inflation report, traders assigned an 82.5% chance of a September rate cut, according to CME FedWatch, only slightly down from Monday’s 86%.

Tariff Pressures Still a Risk

Russell Price, chief economist at Ameriprise Financial, noted that shelter prices — a major CPI component — began moderating in July. “It was a good report today,” he said, pointing to a favorable near-term inflation outlook despite potential tariff-related bumps.

However, economists warn that tariff effects may appear in the fall as companies work through stockpiled goods. Scott Lincicome from the Cato Institute highlighted rising effective tariff rates and shrinking inventories.

Notably, Bitcoin and Ethereum have benefited from cooling inflation, which has fueled expectations of a possible Fed rate cut. However, such confidence might be swiftly dashed by ongoing core inflation and the prospect of further tariffs. Since the Fed’s decision could influence the short-term trajectory of cryptocurrency values.

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