Soft U.S. inflation at the wholesale level pushed crypto markets higher on Wednesday, after the Bureau of Labor Statistics reported the August Producer Price Index (PPI) unexpectedly fell 0.1% month‑over‑month — versus analyst forecasts for a 0.3% rise and July’s 0.9% gain. On a year‑over‑year basis, PPI slowed to 2.6% from 3.1%, well below the 3.3% estimate.
Core PPI, which excludes food and energy, also disappointed: down 0.1% m/m against an expected +0.3%, and 2.8% year‑over‑year versus forecasts near 3.5%. The cooler readings briefly shifted market odds toward faster Fed easing.
Crypto reaction was immediate. Bitcoin climbed to about $113,700–$113,900, marking roughly a 1% gain over 24 hours at the time of reporting. Ether posted similar gains while Solana (SOL) led the majors, rising about 3.3% to $224.
Traders moved to price in a larger near‑term cut from the Federal Reserve. Per CME FedWatch, the probability of a 50 basis‑point cut at next week’s meeting rose to roughly 10% (up from 7% before the PPI print and 0% a week earlier). Market attention now turns to tomorrow’s Consumer Price Index and the Fed decision that follows.
Why readers should care: easier monetary policy can be a tailwind for risk assets, but recent price action shows crypto’s response is uneven. Bitcoin has often spiked on dovish signals — then pulled back — even as traditional safe havens like gold move decisively higher. As Caleb Franzen of Cubic Analytics put it, softer wholesale inflation is welcome if it helps bring down consumer inflation and lets the Fed focus on labor‑market weakness.
Risk note: These moves can be short‑lived. Crypto markets remain volatile and sensitive to macro news; past performance is not indicative of future results. Traders should factor in heightened volatility when sizing positions and avoid assuming short-term prints guarantee a sustained trend.
What could happen next: If the Consumer Price Index also prints cooler than expected, markets may further price in Fed easing and extend gains for crypto; conversely, a hotter CPI or stubborn wage data could quickly erase the rally. Longer‑term investors should weigh fundamentals, diversification and position sizing amid ongoing macro uncertainty.
Source: CoinDesk. Read the original coverage for full details.