US Inflation Shock: July’s Mere 0.2% Rise Defies Expectations—What It Means for Crypto
Markets braced for impact—then got a whimper instead. July's inflation data just sidestepped forecasts with a barely-there 0.2% climb. Cue the collective Wall Street gasp.
Soft inflation? More like rocket fuel for risk assets.
While traditional finance scrambles to revise rate-cut bets, crypto traders are already pricing in the Fed's next dovish pivot. Because nothing makes money move faster than the scent of cheap liquidity—except maybe a Goldman Sachs analyst spotting a 'buying opportunity.'
Funny how 'transitory' inflation always seems to last exactly until election season.
Shelter and services prices lead monthly increases
The BLS report showed shelter costs up 0.2%, making it a major driver of the monthly rise. Food prices stayed unchanged, while energy prices fell 1.1%. New vehicle prices, an area sensitive to tariffs, were flat, but used cars and trucks increased 0.5%. Transportation services and medical care services both jumped 0.8%.
Some tariff effects appeared in other categories. Household furnishings and supplies ROSE 0.7% after a 1% increase in June. Apparel prices were barely higher at 0.1%, while core commodities moved up 0.2%. Prices for canned fruits and vegetables, which are often imported and exposed to tariffs, showed no change.
Former WHITE House economist Jared Bernstein said on CNBC that tariffs are present in the data but not yet creating major spikes. Bernstein served under former President Joe Biden and noted the current pace did not suggest extreme pricing pressures.
The release comes during tensions between TRUMP and the BLS. Earlier in August, Trump removed the commissioner after a weaker-than-expected July nonfarm payrolls report. On Monday, he announced plans to nominate E.J. Antoni, a frequent critic of the bureau, as the next commissioner.
Fed rate cut expectations climb after inflation data release
Markets responded immediately to the CPI data, with CME Group’s FedWatch tool showing higher probabilities for interest rate cuts at the three remaining Federal Reserve meetings this year. The September meeting now carries a 91.8% chance of a cut compared to 85.9% a day earlier. October odds increased to 66.3% from 55.1%, and December to 56.7% from 45%.
While headline inflation matched monthly forecasts and was slightly below annual estimates, the higher core reading drew attention. The 3.1% yearly core increase topped the consensus 3% and indicated that some underlying price pressures remain.
On Wall Street, strategists reacted to the figures. Alexandra Wilson-Elizondo, global co-chief investment officer for multi-asset solutions at Goldman Sachs Asset Management, said the data supports the view that tariff impacts will be temporary. She pointed to companies managing costs through inventory drawdowns and cautious pricing to avoid alienating consumers. She said the numbers strengthen the case for a September rate cut.
Skyler Weinand, chief investment officer at Regan Capital, said the July CPI was mild enough to give the Fed room to lower rates by 25 basis points in September, with the possibility of a 50 basis point cut. He cited the combination of the inflation data and the weak July jobs report as reasons for easing policy.
Josh Jamner, senior investment strategy analyst at ClearBridge Investments, said the CPI’s alignment with expectations WOULD not alter market views on a September cut, which had been largely priced in. He said the report should lift risk assets as traders unwind hedges taken to guard against a surprise price jump that never happened.
Art Hogan, chief market strategist at B. Riley Wealth, compared the reaction to the CPI release to the question of whether a falling tree in a forest makes a sound if no one is there to hear it.
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