Bitcoin, ETH bounce as US inflation cools, boosting odds of September Fed cut

August 12, 2025 — The cryptocurrency market saw a sharp rally today as Bitcoin (BTC) and Ethereum (ETH) surged following cooler-than-expected U.S. inflation data. The fresh figures have boosted investor confidence that the Federal Reserve could cut interest rates as early as September, setting a bullish tone across global markets.

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📉 US Inflation Eases in July

The U.S. Consumer Price Index (CPI) for July rose 2.7% year-over-year, slightly below the 2.8% forecast, according to AP News. This softer-than-expected inflation reading suggests that price pressures are gradually cooling, fueling hopes that the Fed will adopt a more dovish stance.

However, core CPI—which excludes volatile food and energy prices—remains elevated at 3.1%, a figure that could still keep the central bank cautious, as noted by Economies.com.

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🚀 Crypto Markets React

Following the CPI announcement:

• Bitcoin jumped above $119,000, registering a strong intraday gain.
• Ethereum surged to $4,350, benefiting from the broader “risk-on” sentiment.

Market analysts at AInvest noted that crypto assets tend to perform well when interest rate cut expectations rise, as lower borrowing costs and a weaker U.S. dollar often drive alternative asset demand.

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📊 Fed Rate Cut Odds Soar

Traders sharply increased their bets on a September 2025 interest rate cut:

• 94% probability of a 25 basis-point cut
• Futures markets also hint at the possibility of a 50 basis-point cut

According to the Wall Street Journal, Wall Street has quickly priced in a more accommodative Fed stance.

Veteran economist Jeremy Siegel told MarketWatch that a rate cut is now almost inevitable, predicting multiple cuts extending into early 2026.

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⚠️ Caution Remains

Despite the optimism, some risks linger:

• Core inflation is still above the Fed’s 2% target.
• Strong labor market data could delay rate cuts.
• Geopolitical and macroeconomic shocks remain a threat to crypto stability.

Analysts warn that while the market is riding on rate-cut hopes, a hawkish signal from Jerome Powell during the Jackson Hole Symposium later this month could dampen the rally.

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📌 Key Takeaways

Factor	Impact on Market
Headline CPI at 2.7%	Positive: Drove BTC/ETH rally
Core CPI at 3.1%	Neutral/Cautious: Could slow Fed easing
Fed rate-cut expectations	Strong bullish driver
Future Fed communication	Will decide sustainability of current rally

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🔮 Outlook

With inflation easing and market sentiment turning bullish, Bitcoin and Ethereum could see more upside if the Fed confirms a September rate cut. However, traders should monitor upcoming economic data releases and Fed speeches for any shift in tone.

For now, crypto bulls are back in control — and September could be the start of a new rally phase for the digital asset market.