Bitcoin surges - The market bets on the Fed cutting interest rates in September

The price of Bitcoin (BTC) reacted to the consumer price index data (CPI) of America, indicating that inflation in July was lower than expected. This development occurs against the backdrop of the tariffs imposed by President Donald Trump continuing to apply pressure, which could put the Federal Reserve (Fed) in a difficult position.

Inflation in July this year is lower than expected

The U.S. Bureau of Labor Statistics (BLS) released CPI data today (12/8), showing that inflation in America increased by 2.7% compared to the same period last year in July.

Although lower than the forecast of 2.8%, the new CPI data shows that inflation in America remains high. This is further supported by previous reports, which recorded that the proportion of commodity - service groups with high price increases in the CPI basket reached 40% in July 2025, the highest level this year.

Moreover, data also shows that the proportion of CPI components with a price increase rate above 4% remains significant, reflecting persistent inflationary pressures despite a decrease from the peak of 60% in 2022. Considering the aforementioned factors, the impact of price increases due to tariffs is becoming increasingly evident.

In this context, Bitcoin has slightly increased, nearing the 119,000 USD mark right after the data was released. However, the reaction was relatively limited as the market had anticipated this scenario, with the CPI aligning with economic expectations, thereby easing concerns.

Bitcoin price chart (BTC) | Source: Bitcoin MagazineEthereum also surged, reaching 4,400 USD after bouncing more than 3% in the past 24 hours. Data from CoinGlass shows that around 40 million USD in Short ETH positions were liquidated in just 60 minutes.

The Fed faces pressure to cut interest rates

When the crypto market receives information about CPI data, all attention is focused on the next actions of the Federal Reserve. Investors in the market currently forecast a 90% chance that the Fed will lower interest rates by 0.25 percentage points in September.

Before the CPI data is released, the CME FedWatch tool shows an 84.4% chance that the Fed will lower interest rates to 4–4.25%, compared to a 15.6% chance of keeping it at 4.25–4.5%.

Forecast chart for interest rate cuts | Source: CME FedWatch ToolAnalyst Kyle Chasse commented:

"The market no longer speculates... Everything has been reflected in the price."

The CPI report for July is considered an important factor ahead of the Fed meeting in September. With an inflation rate of 2.7%, the likelihood of the Fed cutting interest rates in September remains very high.

Previously, this agency has always maintained a cautious stance, keeping interest rates unchanged as the 2% inflation target has not yet been achieved. However, although the new CPI figure is still far from this target, the Fed may change its position in the context of a weakening labor market.

Expectations that the Fed will lower interest rates in September are driven by lackluster employment data, indicating that the labor market in America is weakening. Although inflation continues to rise, policymakers may be forced to cut interest rates to simultaneously achieve two goals: stabilizing prices (with a target of 2% inflation) and maximizing employment opportunities.

Based on that, analysts have predicted that the price of Bitcoin will respond quite gently after the CPI announcement. Analyst Bull Theory stated:

"The Fed is likely to cut interest rates in September due to weakening employment data, so higher CPI will not significantly impact decision-making. Meanwhile, lower CPI will only help reinforce confidence."

Analyst Miles Deutscher also shares the same opinion, asserting that the Fed will cut interest rates in the upcoming September.

Justin