The latest announcement of the US inflation figures reveals that headline inflation falls below expectations, sparking optimism for a potential Federal Reserve rate cut in September. This is a promising development that is likely to boost positive sentiment in the US stock markets and accelerate the rise of cryptocurrencies. With this backdrop, what are the details of the inflation report, and how do they shape the current expectations for the rate cut?
US Inflation Report
According to the US Bureau of Labor Statistics, the housing index rose by 0.2% in July, largely contributing to the rise across all categories. While the food index remained unchanged on a monthly basis, food consumed outside the home increased by 0.3%, and food consumed at home decreased by 0.1%. On the other hand, the energy index declined by 1.1% in July, with the gasoline index dropping 2.2% throughout the month. These elements collectively define July’s inflation report.
If President Trump avoids a confrontation with President Putin that could drive up oil prices on Friday, the decline in energy prices could continue to offset the inflationary impact of tariffs. The combination of significant cooling signals in the labor sector with relatively stable inflation creates an environment where even Fed Chair Powell might agree to a rate cut.
A notable detail in the report suggests that the Consumer Price Index is influenced by changes in tariffs, though it does not provide a clear measurement. The long-term effects of tariffs on inflation will become clearer over time. Furthermore, the outcomes of the new rates that took effect at the beginning of August will start to manifest next month.
Federal Reserve Rate Cut
With BTC prices returning to $119,000 and ETH also on the rise, the announcement of a new interest rate decision will occur in 36 days and 5 hours. However, after reviewing next month’s August inflation report, the Fed’s rate decision will be made, bringing more clarity to the situation. So far, two Fed members have firmly expressed support for a rate cut. A new member appointed by President Trump is also expected to vote in favor of a cut, while two members have suggested starting cuts due to cooling in employment.
Thus, if two more Fed members acknowledge the limited impact of tariffs on inflation and support rate cuts due to significant cooling signals in employment, a September rate cut is highly probable. Coupled with potential ETF approvals, the cryptocurrency market may enjoy a favorable year-end.
