Inflation Drops To 3.4 % But Bitcoin Struggles For Momentum

The release of US inflation data on August 12 did not provide markets with the much-expected positive signal. Indeed, there is a slowdown in price increases, not forgetting the Fed’s reservations on the economic trajectory. Bitcoin investors hesitate to adopt an aggressive accumulation policy. The crypto market thus remains dependent on upcoming economic data and, above all, on how the Federal Reserve chooses to interpret them.

American inflation slows

Thanks to official information published on August 12 by the Bureau of Labor Statistics, the Consumer Price Index (CPI) rose by 0.1% in July based on a seasonally adjusted basis. This progression strictly conforms to forecasts by US stock market analysts. The pace of annual inflation is thus brought down to 3.4% from 3.5% in June and a peak in May of 4.2%. It is appropriate to exclude volatile categories such as food and energy from the calculations of the core indicator. The latter records a monthly increase of 0.2% and 2.5% on the year.

Thus, this annual change of the underlying inflation component fits into the moderate measures observed since January 2021. Indeed, the housing component is the driving catalyst of the price rebound within this general dynamic. Two-thirds of the monthly increase in the overall index have been generated by housing-related costs. This increase is therefore driven by a 0.3% rise in rents and equivalent owner rents. There is also a slight 0.1% increase in food prices due to a 0.3% rise in dining out, while basic supermarket food products saw a 0.1% decrease.

The temporary relief offered by the energy sector in July explains this statistical respite. According to official data, the overall energy index fell by 1.5% month-over-month. This decrease is driven by a 2.9% drop in gasoline pump prices after seasonal adjustments. However, various expenditure items related to essential services have sustainably pushed the core indicator upward.

The combination of these incompatible factors automatically triggered a buying reaction on futures contracts related to US stock indices before market opening. Such a combination illustrates investors’ relief.

The correct breakdown of main variations observed by economic component allows measuring the exact structure of the July inflation report :

• Overall CPI : +0.1% month-on-month (+3.4% year-on-year, down from 3.5% in June) ;
• Core CPI excluding food and energy : +0.2% month-on-month (+2.5% year-on-year) ;
• Housing sector : +0.1% month-on-month, generating nearly two-thirds of the overall monthly increase ;
• Energy sector : -1.5% month-on-month, driven by a 2.9% drop in gasoline prices ;
• Services and transportation : +2.2% for airfare, +0.4% for medical care, and +0.4% for used vehicles.

Energy Risk and the Federal Reserve

An obvious threat continually hangs over the long-term economic trajectory, given the energy crisis earlier this year, despite the indisputable relief brought to monetary authorities by the monthly figures. The energy sector remains significantly up 14.7% over the rolling twelve-month period, although gasoline prices show a spectacular annual increase of 24.6%. These statistics bear the scars of the oil shock linked to geopolitical tensions observed in the Middle East as well as logistical disruptions seen in the first half of the year.

While Brent crude stabilizes around $91 and West Texas Intermediate trades near $83, the Fed finds itself in an uncomfortable position. Following the maintenance of its key rate in the 3.50% to 3.75% range in July, many internal divisions are evident at the US central bank. Such situations are confirmed by the dissenting vote of three governors. Indeed, these members advocate for monetary tightening. Officials have stressed that a succession of several consecutive months of decline would be necessary before asserting a durable decrease of inflation to 2%.

Prospects of short-term rate declines are immediately restrained by an uncertain macroeconomic environment. Thus, investors must take into account the Federal Reserve’s decisions forced to maintain a restrictive stance as long as energy and services threaten to bring back inflationary pressures. Also, the slight decrease in real hourly wages, given the rising cost of living at certain indicators, contributes to the deterioration of households’ real purchasing power. In such a context where capital costs remain high and overall demand shows signs of fatigue, global liquidity struggles to flow towards more speculative markets.

Bitcoin stagnation around $64,000

The crypto market shows remarkable resilience to these macroeconomic difficulties. This apathy sharply contrasts with the significant volatility observed after previous economic data releases. Upon announcement of the report figures, bitcoin remained stable. It gave up 0.4% before stabilizing in a range between $63,800 and $64,300, after briefly touching the lower $63,000 range. Thus, there is a phase of accumulation in the $60,000 zone for the main cryptocurrency.

In this perspective, investors avoid committing heavily without obtaining clear and solid guarantees on the evolution of monetary policy. Moreover, the absence of a clear catalyst in the market reveals a waning of flows, while the bitcoin market wavers under the repercussions of liquidity conditions. In the absence of a monetary easing signal from the Federal Reserve or a drop in energy prices, the crypto market in general, and bitcoin in particular, could continue evolving in an uncertain dynamic.

The coming days will be more than decisive. They will allow us to know whether the current stagnation of the bitcoin price signals a correction or a new accumulation phase before a probable rebound. The true test is now set for September 11, 2026, when the US government will release inflation figures for the month of August.