US PPI Inflation Cools To 2.2%, Crypto Market Recovery Ahead?

The global financial market, let alone the crypto market, was eagerly waiting for the US Producer Price Index (PPI) data for cues on inflation. The latest data showed that the US PPI inflation cooled to 2.2% in July, from 2.7% in the prior month. This data, which also came in line with the market expectations, appears to have further fueled optimism over a potential rate cut by the US Federal Reserve at their upcoming meeting.

US PPI Inflation Eases To 2.2%

The latest Labor Department data showed that the US PPI inflation came in at 0.1% in July, down from 0.2% in the prior month. Simultaneously, on a year-over-year (YoY) basis, the inflation was 2.2%, after it came in at 2.7% in June. Notably, the market was anticipating the inflation figures to show an acceleration of 0.2% for July.

However, the Core PPI for July, which excludes the food and energy prices, remains unchanged, after it accelerated at a rate of 0.3% in the prior month and down from the market expectations of 0.2%. On a 12-month basis, the Core inflation came in at 2.4%, down from 3% noted in June and lower than the market expectations of 2.7%.

Meanwhile, the PPI inflation figures are a key metric that the US Fed considers while deciding their policy rate plans. Although the latest figure showed that the inflation still stayed above the central bank’s 2% target range, the cooling figures appear to have bolstered market optimism over a potential rate cut by the Federal Reserve at their September meeting.

Crypto Market Recovery Ahead?

Bitcoin has wiped off some of its recent losses following the weaker-than-anticipated US PPI inflation figures. As of writing, BTC price crossed the brief $59,000 mark, after falling below the $58,000 mark recently.

Meanwhile, the latest inflation data also raised bets over a 50 bps rate cut by the US Federal Reserve at their upcoming meeting. According to the CME FedWatch Tool, there are 54.5% odds over a 50 bps rate cut, with 45.5% betting over a quarter basis rate cut in September.

This has bolstered market optimism, as the lower policy rates fuel market confidence and raise the risk-bet appetite of investors. In addition, several Federal Reserve officials also hinted that inflation is one of the final challenges that the central bank might face before deciding its policy rate plans.

Following the latest figures, the US 10-year Bond Yield fell 0.80% to 3.879, while the US dollar index declined 0.10% to $102.870.

As of writing, the crypto market was still in the red, with its market cap at $2.08 trillion. However, looking at the last one-hour performance, Bitcoin and altcoins appear to be rebounding from the recent lows. Now, the market eagerly awaits another crucial inflation indicator, i.e. the US CPI data, which is scheduled to be released on August 14.