US July CPI data drops to 2.7%, boosting expectations of a September Federal Reserve rate cut as markets react to soft inflation.

 

The latest U.S. Consumer Price Index (CPI) data for July showed a yearly increase of 2.7%, below the forecast of 2.8%. The softer reading has increased expectations that the Federal Reserve could lower interest rates in September.

Market reaction was swift, with bond yields falling, the dollar weakening, and equities gaining.

July CPI Data Comes in Lower Than Expected

The Bureau of Labor Statistics reported that the headline CPI rose 0.2% in July compared with June, matching forecasts. On a yearly basis, the 2.7% reading was slightly below market expectations.

Core CPI, which excludes food and energy prices, rose 0.3% month-on-month and 3.1% year-on-year.

The BLS reported a CPI of 2.7%, but this does not show the true situation.

These figures refer to data from weeks ago and don’t accurately reflect Americans’ consumption basket.

TRUE inflation is 1.83%. The Fed needs to cut, NOW!

CC: @DataRepublican, @EricLDaugh,… pic.twitter.com/KCNqyok3Mk

— Truflation (@truflation) August 12, 2025

President Donald Trump pointed to the CPI data as proof that tariffs have not raised consumer prices. He criticized analysts, including economists at Goldman Sachs, for predicting higher inflation from trade measures.

Joseph Lavorgna, counselor to Treasury Secretary Scott Bessent, said exporters were cutting prices to offset tariff effects.

Market Bets Increase on September Rate Cut

Following the CPI release, traders increased their bets that the Federal Reserve will cut rates in September.

Data from LSEG showed the probability of a 25 basis point cut rising to 98% from about 89% earlier in the day. Two-year Treasury yields, which are sensitive to Fed policy changes, dropped by about two basis points to 3.729%.

Andrew Szczurowski of Morgan Stanley Investment Management said the Fed now appears further from its labor market target than its inflation goal. Weak job growth in July and downward revisions to earlier employment data have added to the case for monetary easing.

Investors are also awaiting August inflation and labor data before the Fed’s next meeting.

Public Reaction and Economic Context

The CPI release sparked discussion among economists, policymakers, and market commentators. On X platform, Crypto Rover noted the drop to 2.7% and predicted that “rate cuts are coming.”

Truflation, an independent data provider, claimed that actual inflation was lower at 1.83%, arguing that the official CPI reflects outdated data.

BREAKING:

CPI DATA CAME IN AT 2.7%

EXPECTATIONS: 2.8%

RATE CUTS ARE COMING! pic.twitter.com/mTiKrbMRj4

— Crypto Rover (@rovercrc) August 12, 2025

Economists said that tariff-related price increases may take time to fully appear in the data. Tiffany Wilding of PIMCO expects core CPI to peak at 3.4% by the end of the year. Tom Porcelli of PGIM Fixed Income added that any price rises from tariffs would likely show up gradually rather than in one month.

The subdued CPI data comes amid signs of a slowing labor market and global trade tensions. Moreover, the Federal Reserve will weigh these factors alongside other upcoming economic reports.

The soft inflation and weak job numbers have made a September rate cut the most likely scenario according to market pricing.

The post CPI Inflation Rate Drops to 2.7%, Signaling Potential Federal Reserve Cuts appeared first on Live Bitcoin News.

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Filed under: Bitcoin - @ August 13, 2025 9:20 pm