US Inflation Falls To 1.7% Ahead Of Key Fed Decision On July 30

Key Insights:

• Truflation data shows US inflation dropped from 2.1% to 1.7% in under two weeks.
• Markets anticipate no rate cut in July but see rising odds for a September move.
• Bitcoin eyes breakout as dollar weakens, inflation cools, and money supply hits record $55.48 Trillion.

US inflation has fallen sharply to 1.7%, according to Truflation data updated on July 8. The drop puts inflation below the Fed’s 2% target. Also, it has intensified speculation ahead of the upcoming July 30 FOMC meeting.

This rapid cooling in inflation adds pressure on the Federal Reserve. This has forecast higher prices and slower growth. Yet, the current market data may force a policy shift sooner than expected.

Inflation Falls Below Fed Target as Market Eyes July 30 Meeting

The Truflation US Inflation Index shows inflation dropped to 1.7%, its lowest in months and below the 2% target. This marks a 0.52-point decline from June 29 and a 0.4-point drop in just two weeks. Meanwhile, the Bureau of Labor Statistics still reports a higher 2.4% inflation rate.

Despite this, the Federal Reserve remains cautious and has maintained its benchmark rate between 4.25% and 4.5%. The Fed continues to project two rate cuts for 2025, but only one for 2026. However, traders are reassessing these projections as inflation cools faster than expected.

Fed Chair Jerome Powell said on June 18 that rising prices could affect summer spending. He cited new tariffs and global policy shifts. But real-time inflation readings now contradict those concerns. Powell also highlighted the labor market’s strength, which has held unemployment near 4.2%.

Markets Expect No Cut in July, But September Looks Likely

Fixed income traders are not expecting a rate cut at the July 30 meeting. CME data is showing just a 5% chance. Yet the probability of a September rate cut has risen to 61% amid rapidly falling inflation. Upcoming CPI data on July 15 may further influence those expectations.

Economic projections released in June by the Fed forecast annual inflation at 3% for 2025, up from March’s 2.7% estimate. However, current indicators are already running well below those forecasts, which could pressure the Fed to act.

At the same time, GDP growth expectations have dropped from 1.7% to 1.4%. While job market data remains strong, with stable employment levels, the Fed may still shift its tone in upcoming statements.

Investors are closely watching the July 9 release of Fed minutes, which could offer new insights. If policymakers acknowledge the US inflation drop, sentiment may shift rapidly.

Crypto Rallies on Inflation Dip and Liquidity Boom

As inflation dips and monetary policy remains uncertain, crypto markets are showing signs of strength. Bitcoin remains range-bound between $107,000 and $110,000.

However, it shows bullish patterns on shorter timeframes. Technical indicators like RSI and the Awesome Oscillator suggest building upside momentum.

Further, the world monetary supply has hit an all-time high of $55.48 Trillion. This is what is being referred to as a liquidity bubble. This is being caused by the easing by central banks and the bank lending.

Traditionally, Bitcoin surges 3 to 6 months after these monetary expansions. Bitcoin, with its fixed supply and decentralized design, is often seen as a hedge against fiat devaluation.

In contrast, the US dollar has lost over 96% of its value in the past century. This year, the dollar index has dropped nearly 11%, its worst performance since the early 1970s.

Bitcoin and Dollar Diverge as Fed Holds Rates

The declining dollar and the increasing Bitcoin price highlight a growing disconnect between decentralized and fiat assets. Bitcoin has increased by 16% this year and is trading close to all-time highs.

In the meantime, the purchasing power of the dollar is still fading away as the expectations of inflation are changing. Other analysts believe that an unexpected Fed rate cut will drive Bitcoin higher.

In April, BTC rallied 27% in two weeks after an identical decline in inflation and an increase in money supply. Although Bitcoin is a risky, volatile asset, it outperforms conventional assets during the monetary easing period.

There is also a general anticipation of policy easing, which is affecting the crypto market. Altcoins such as Ethereum are becoming popular as investors prepare to shift macro. An official Fed pivot might spark the next stage of the crypto bull run.

Disclaimer

This article is for informational purposes only and provides no financial, investment, or other advice. The author or any people mentioned in this article are not responsible for any financial loss that may occur from investing in or trading. Please do your research before making any financial decisions.