Inflation Data — Here's How Crypto Will Respond Today!

The consumer price index (CPI) is coming this Wednesday, just ahead of the Federal Reserve's next meeting, where they may begin a series of interest rate cuts. This data will be key in shaping the Fed's decisions and market reactions.

If the report shows inflation is lower than expected, the Fed could ease rates more quickly or more intensely. However, if inflation is more substantial, the Fed may take a slower approach.

Here’s what to watch for:

* Consumer prices are expected to rise 0.2% from July.

* Core CPI, which excludes food and energy, is also expected to increase by 0.2%.

* Year-over-year, CPI is forecasted to drop to 2.6%, while core CPI will likely stay at 3.2%.

My Outlook and What It Means for Crypto

The market expects a 25bps rate cut in September (see chart below).

As mentioned, I don't expect surprises, and the CPI data should align with expectations. In this case, the FED will likely pursue the 25bps rate cut scenario in September.

As excited as people are about the rate cuts, I predict that crypto prices will go lower (short-term) in this case simply because this is already priced in!

So, if the CPI comes in as expected, we might actually see a price decrease in crypto.

However, if CPI comes in much higher, it could fuel hopes of a 50bps rate cut, which might lead to a price increase in crypto.