Hot CPI Inflation Data of 2.7% Puts September Fed Rate Cut in Doubt?

Key Insights:

• US CPI inflation rises to 2.7% against 2.6% forecast, rising for two consecutive months.
• US CPI increased month-over-month as expected by Wall Street Giants.
• Bitcoin and Ethereum prices look volatile in response to the U.S. dollar index and 10-year Treasury yield.

The headline CPI inflation in the United States accelerated for the second month to 2.7%, above the market expectations. This would take the expected Fed rate cut in September off the table as US President Donald Trump pushes for tariffs in Europe, Mexico, and Russia.

Bitcoin and Ethereum prices were trading lower on Tuesday after traders braced for a selloff by whales and macroeconomic data.

Will BTC and ETH prices drop lower on hot CPI inflation?

US CPI Inflation Comes in Hot

The U.S. Bureau of Labor Statistics released the most-awaited June CPI inflation data on July 14. The report became crucial for global investors as it would have confirmed the Fed rate cut resuming in September.

As per the report, the headline CPI inflation rises to 2.7%, against a 2.6% forecast. Inflation has now accelerated for two consecutive months. Moreover, the annual core CPI came in at 2.9%, lower than the expected figure of 3%.

The month-over-month CPI inflation rate increased by 0.3%, higher than the 0.1% rise last month. Besides, the core CPI monthly comes in at 0.2% against 0.3% expectations, but higher than the 0.1% rise last month.

Most Wall Street giants estimated the headline CPI inflation to rise between 2.6%-2.7%. JPMorgan, Bank of America, BNP Paribas, Goldman Sachs, JPMorgan, Morgan Stanley, and other predicted a 2.7% CPI reading.

Meanwhile, financial services giants expected the monthly inflation print to be higher between 0.25-0.31%, according to The Wall Street Journal. They asserted businesses likely started to pass on higher import costs resulting from newly imposed tariffs.

Fed Rate Cut in Doubt

The hot CPI inflation data would give the U.S. Federal Reserve more room to delay Fed rate cuts and avoid any monetary policy change amid trade tariffs.

At the time of writing, the CME FedWatch showed a 58% probability of a 25 bps rate cut by the Federal Reserve in September. However, the odds of two rate cuts this year have faded.

Bond traders were also uncertain that the Fed rate cut would resume in September, according to a Bloomberg report.

At the time of writing, the US dollar index (DXY) showed volatility and was moving around 98. The 10-year US Treasury yield held its advance at around 4.421% after the key economic data.

Bitcoin Price Holds Near $117K

Bitcoin price holds near $117K after the CPI data release. The price slipped earlier due to a selloff by the Satoshi-era whale and tariff jitters. The 24-hour low and high were $116,373 and $122,085, respectively.

CoinGlass data also showed buying the dip sentiment in the derivatives market. At the time of writing, the total BTC futures open interest was up 1% to $86.70 billion in the last 4 hours.

BTC futures OI on CME and Binance were up by 0.30% each in the last 4 hours. This signals positive sentiment among derivatives traders.

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