US Inflation Just Gave Bitcoin a New Reason to Rally

U.S. inflation remained in line with expectations in July, offering markets some relief and reducing expectations for another Federal Reserve rate hike.

The Consumer Price Index (CPI) rose 3.4% year over year in July, easing from 3.5% in June and matching economists’ expectations. On a monthly basis, consumer prices increased 0.1%, following a 0.4% decline in June.

Core CPI, which excludes food and energy prices, rose 0.2% month over month and 2.5% year over year. Both readings were in line with forecasts, while annual core inflation eased from 2.6% in June.

The data suggests that inflationary pressures are gradually moderating, although inflation remains above the Federal Reserve’s 2% target.

The July CPI report prompted a notable shift in expectations for the Federal Reserve’s next policy decision.

Markets now price roughly a 34% probability of a September rate hike, the lowest level since July 17 and about half the level seen on July 27.

Treasury yields also moved lower following the report. The two-year yield hovered around 4.19%, while the 10-year yield stood near 4.66%.

The combination of easing inflation and recent weakness in the labor market is increasing speculation that the Federal Reserve may have less reason to maintain its restrictive policy.

The Kobeissi Letter@KobeissiLetter

BREAKING: Market expectations for a September rate hike fall to 34% after US CPI inflation declines to 3.4%. This marks the lowest chance of a September rate hike since July 17th. Odds of a September rate hike are now HALF of what they were on July 27th.

12:41 PM · Aug 12, 2026 · 127K Views

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The crypto market responded positively to the inflation data, with major cryptocurrencies posting modest gains.

Bitcoin rose about 0.7% to $64,142, while Ethereum gained 1.7% to $1,912. Solana and XRP also moved higher.

Bitcoin briefly dipped after the CPI release, falling from around $64,400 before stabilizing. The limited reaction suggests that traders had largely anticipated a CPI reading close to expectations.

Still, the broader macroeconomic backdrop remains important for digital assets. Lower interest-rate expectations can improve liquidity conditions and increase investor appetite for riskier assets such as cryptocurrencies.

Institutional demand and crypto ETF flows also remain important factors supporting the market.

Gold extended its recent rally alongside the broader market reaction.

Gold futures briefly climbed above $4,500 per ounce, reaching their highest level since June 5. The precious metal has gained roughly 14% since July 17 as investors continue to seek defensive assets amid economic and geopolitical uncertainty.

July’s CPI report provides another constructive signal for risk assets, but it does not guarantee a sustained crypto rally.

The inflation data follows a weaker-than-expected U.S. jobs report, which showed the economy lost 23,000 jobs in July, compared with expectations for an increase of 80,000.

With inflation continuing to moderate and expectations for further rate hikes declining, the macroeconomic environment could become more favorable for Bitcoin.

The next major focus for investors will be upcoming economic data and Federal Reserve commentary. If inflation continues to cool while the labor market weakens, expectations for easier monetary policy could provide another catalyst for Bitcoin and the broader crypto market.