The latest Consumer Price Index report landed softer than Wall Street expected, with headline CPI printing at 4% year-over-year and core CPI at 3%. Both figures came in below consensus forecasts, and the market did exactly what you’d expect: risk assets caught a bid.

Bitcoin climbed to hover near $62,600 following the release, while Ethereum also posted immediate gains.

The Fed calculus just shifted

The Federal Reserve’s target rate currently sits between 3.50% and 3.75%. A cooler-than-expected inflation print doesn’t guarantee a rate cut, but it certainly makes the conversation easier for dovish members of the FOMC.

The next FOMC meeting is scheduled for July 28-29, 2026. That’s roughly two weeks away, which means this CPI report will be one of the last major data points the Fed digests before making its decision.

FedWatch probabilities have already started shifting in response. While no-change scenarios still appear to dominate expectations for the July meeting, the evolving probabilities suggest traders are increasingly pricing in the possibility of easing.

Fed Chair Kevin Warsh laid out cautious projections back in June, with some officials even contemplating potential rate hikes later in 2026. Labor data remains resilient, which gives the Fed cover to stay patient.

Why crypto reacts so sharply to CPI prints

Crypto assets tend to exhibit amplified reactions to macroeconomic data releases, particularly Ethereum, which has historically shown even more sensitivity to these prints than Bitcoin. The logic is straightforward: lower inflation expectations push down real yields, which makes non-yielding assets like crypto relatively more attractive.

Back in November 2025, when CPI came in at 2.7%, Bitcoin staged a notable rally in the aftermath. Negative inflation surprises have consistently triggered short-term rallies in digital currencies over the past couple of years.

The current print follows that exact playbook. Both headline and core CPI surprised to the downside, and both Bitcoin and Ethereum responded with upward moves almost immediately.

What this means for investors

Warsh’s cautious posture introduces genuine uncertainty about the second half of 2026. If the Fed Chair is publicly leaving rate hikes on the table, it means the committee isn’t unanimous about the inflation trajectory being sustainably lower. The 4% headline figure is still well above the Fed’s 2% target.

Geopolitical tensions involving Iran add another layer of unpredictability. Energy price shocks could reverse the disinflationary trend quickly.

Volatility around the July 28-29 FOMC meeting is essentially guaranteed at this point. If July and August data continue to come in soft, the case for a September rate cut becomes very difficult for even the most hawkish Fed officials to dismiss.