Treasury Secretary Scott Bessent called for a 50 basis point Federal Reserve rate cut in September following Tuesday’s “incredible” inflation report, which will be a dramatic shift from the Fed’s hawkish stance that maintained rates at 4.25%-4.5% through five consecutive meetings.
The July consumer price index rose 0.2% monthly and 2.7% annually, below the 2.8% estimate, while core CPI reached 3.1% yearly, exceeding the 3.0% forecast.
Mixed Inflation Data Masks Persistent Price Pressures in Key Sectors
White House Press Secretary Karoline Leavitt emphasized that inflation “beat market expectations once again and remains stable.”
She highlighted Trump’s commitment to lowering costs while noting that tariffs are “raking in billions of dollars” with small business optimism at five-month highs.
However, inflation analysis reveals significant price pressures in essential categories despite the headline improvement.
Core CPI has now risen for three consecutive months, marking the first such streak since September 2022.
Market reactions favored risk assets despite the mixed data.
According to a CNBC report, Alexandra Wilson-Elizondo from Goldman Sachs Asset Management noted the Fed is receiving “data support that the tariff effect on price level will mostly be transitory” as companies offset cost pressures by drawing down inventories.
As a result, market odds for a September rate cut surged above 96% from 80% following the inflation data, with traders now pricing three Fed cuts before year-end.
Source: FedWatch Tool
The S&P 500 reached fresh all-time highs while the dollar weakened below its 50-day moving average, creating favourable conditions for crypto markets that have become increasingly tied to macroeconomic indicators.
According to a Bloomberg report, Bessent expressed hope that Trump’s Fed board nominee Stephen Miran would be confirmed by the Senate in time for the September 16-17 policy meeting.
He noted Trump is casting a “very wide net” for Jerome Powell’s successor, whose term expires in May, citing monetary policy views, regulatory stance, and organizational reform capabilities as key criteria.
The Treasury Secretary’s comments contrast sharply with previous Fed communications, where Powell eliminated September rate cut expectations during July’s meeting, causing Bitcoin to briefly dip below $116,000 before recovering.
Two Fed governors dissented in favor of cuts for the first time since 1993.
Political Tensions Escalate as Economic Data Supports Dovish Pivot
President Trump has intensified criticism of Powell, sending handwritten notes accusing the Fed Chair of costing America “trillions of dollars in interest cost” and considering “a major lawsuit” against him for doing a “horrible and grossly incompetent job.”
Trump demanded Powell “must now lower rates” and claimed the “damage he has done is incalculable.”
The political pressure coincides with Trump’s aggressive tariff implementation, including 40% duties on Brazil and 50% tariffs on copper imports announced during previous Fed meetings.
However, Trump maintains tariffs have not caused inflation, stating “massive amounts of cash” are pouring into the US while criticizing Goldman Sachs for refusing to “give credit where credit is due.”
Powell previously suggested interest rates would have declined sooner without the president’s tariff agenda, leading to accusations from market participants of maintaining “politically motivated monetary policy.”
Notably, Senator Rand Paul has earlier criticized both Trump’s tariffs and Fed policy. He advocates for market-determined rather than centrally planned interest rates.
Core inflation remains 110 basis points above the Fed’s 2% target, creating a complex policy environment.
However, imported goods inflation stayed lower than feared as companies continued absorbing tariff costs, supporting the case for accommodation despite elevated core readings.
Crypto Markets Position for Extended Rally Amid Monetary Easing
Despite July’s Fed-induced volatility that saw Bitcoin drop below $106,000, cryptocurrency markets have stabilized above critical support levels with the global crypto market cap maintaining above $3.8 trillion.
The Fear and Greed Index registered 63, indicating continued bullish sentiment despite increased caution.
Source: CMC
The dollar’s weakness following inflation data supports emerging market investments by reducing borrowing costs and lowering import prices for dollar-denominated commodities.
Brazil’s central bank cut its Selic rate from 11.75% to 10% this year, while similar trends emerged in Chile and Indonesia as currency stability provided monetary policy flexibility.
Bitcoin ETFs now hold $155 billion in assets while Ethereum ETFs manage $27 billion, maintaining institutional adoption momentum despite temporary inflow slowdowns.
Cryptocurrency analysts maintain optimism about the bull cycle’s durability.
Speaking with Cryptonews, Ray Youssef from NoOnes noted that while Fed and political market stirs may cause “macro tremors,” the broader bullish structure remains intact as Bitcoin’s supply dynamics and institutional demand provide strong price support.
However, Bloomberg Intelligence analyst Mike McGlone warned Bitcoin may be approaching a “sell when they’re yelling” extreme, comparing current euphoria to historical bubble peaks.
He noted gold’s outperformance since Bitcoin reached six figures could signal potential weakness for speculative digital assets.
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