Will Inflation Data Trigger a Crypto Surge?

The upcoming release of inflation data will be pivotal for cryptocurrencies, acting as the final test before potential interest rate reductions. The Producer Price Index (PPI) and Consumer Price Index (CPI) are set to be unveiled in the next two days. These indicators are essential for gauging the Federal Reserve’s direction on rate cuts and assessing the impact of tariffs on inflation.

How Will Inflation Projections Affect Cryptocurrencies?

Bitcoin‘s price remains around $111,000, but the market holds its breath as inflation data looms large, influencing the potential pace of the Federal Reserve’s rate adjustments. Employment figures have been nudging the Fed toward rate cuts, and should tariffs show minimal inflationary effects, more aggressive measures might follow.

What’s on Wells Fargo’s Radar?

The CPI headline rate is projected to creep up from 2.7% to 2.9%, with monthly increments anticipated at 0.3%, just above the previous 0.2%. If inflation figures align with or undercut these expectations, the scenario could turn favorable for cryptocurrencies, indicating a subdued impact from tariffs.

A decline in inflation figures could spur growth in interest rate-sensitive sectors, including gold, Bitcoin, and equities. A favorable data set might kick-start the predicted two rate cuts later this year.

Wells Fargo’s latest report highlighted strong core inflation in July, driven by broad gains across both goods and services, showing that tariffs alone aren’t stabilizing inflation. This trend may persist through August, with core CPI likely to rise 0.3% per month, sustaining a 3.1% annual pace.

Headline CPI might witness a 0.3% monthly climb, reaching 2.9% annually, fueled by escalating food and energy prices. Earlier inventory excess allowed companies to buffer pricing against tariffs, but dwindling stock levels now exacerbate tariff-induced inflation in the U.S.

Wells Fargo foresees modest growth in service inflation. Despite easing labor market trends, ongoing goods price pressures combined with increasing input costs point to a sticky near-term inflation forecast.

“Core inflation is showing strength with broad support, pointing to persistent inflationary pressures in the months ahead,” Wells Fargo analysts commented.