US Inflation Slowdown Fails to Revive Bitcoin

The release of US inflation data on August 12 did not provide the markets with the positive signal they had hoped for. Indeed, there is a slowdown in price increases, not to mention the Fed's reservations about the economic trajectory. Bitcoin investors are hesitant to adopt an aggressive accumulation policy. The crypto market remains dependent on upcoming economic data and, especially, on how the Federal Reserve chooses to interpret them.

In brief

• US inflation slows to 3.4% year-on-year, driven by Core CPI at 2.5% and a temporary drop in energy prices (-1.5%).
• Housing costs (+0.1%) alone account for nearly two-thirds of the monthly increase in the overall index.
• Despite the monthly respite, gasoline remains up 24.6% year-on-year, keeping Brent crude around $91.
• Without a clear catalyst, BTC stagnates in the narrow range of $63,800 to $64,300, ignoring the rise in stock markets.

US Inflation Slows

Thanks to the official information released on August 12 by the Bureau of Labor Statistics, the Consumer Price Index (CPI) rose by 0.1% in July, accounting for a seasonally adjusted basis. This increase closely aligns with the forecasts of analysts from the US stock market. The annual inflation rate is thus brought down to 3.4% from 3.5% in June and a peak of 4.2% in May. It is important to exclude volatile categories such as food and energy from the calculations of the underlying indicator. The latter recorded a monthly increase of 0.2% and 2.5% year-on-year.

Thus, this annual evolution of the underlying inflation element fits into the moderate measures observed since January 2021. Indeed, the housing component serves as the catalyst for the rebound in prices within this overall dynamic. Consequently, two-thirds of the monthly increase in the overall index was generated by housing-related costs. This increase is driven by a 0.3% rise in rents and equivalent owner-occupied rents. There is also a slight increase of 0.1% in food prices due to a 0.3% increase in dining out, while a 0.1% decrease in basic grocery food products is noted.

The temporary relief provided by the energy sector in July explains such a statistical respite. According to official data, the overall energy index decreased by 1.5% month-on-month. This decline is driven by a 2.9% drop in gasoline prices at the pump, according to seasonal variations. However, various expenditure items related to essential services have sustainably pushed the underlying indicator upwards.

The combination of these incompatible factors automatically triggered a buying reaction on futures contracts linked to US stock indices before the market opened. Such a combination illustrates the relief among investors.

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

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

Energy Risk and the Federal Reserve

An obvious threat looms continuously over the long-term economic trajectory, given the energy crisis that occurred earlier in the year, despite the undeniable calm provided to monetary authorities by the monthly figures. The energy sector remains significantly up by 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 related to the geopolitical tensions observed in the Middle East as well as the visible logistical disruptions during the first half of the year.

While Brent crude stabilizes around $91 and West Texas Intermediate trades around $83, the Fed finds itself in an uncomfortable position. Following the maintenance of its key rate in the range of 3.50% to 3.75% in July, numerous internal divisions are observed within the American central bank. Such situations are corroborated by the dissenting vote of three governors. Indeed, they advocate for monetary tightening. Officials have emphasized that a succession of several consecutive months of decline would be necessary before any assertion of a sustainable reduction in inflation to 2%.

Short-term rate regression prospects are immediately constrained by an uncertain macroeconomic environment. Thus, investors must take into account the decisions of the Federal Reserve, which is compelled to adopt a restrictive position as long as energy and services threaten to bring back inflationary pressures. Additionally, the feeble decrease in real hourly wages, given the rising cost of living in certain indicators, contributes to the deterioration of households' real purchasing power. In such a context where the cost of capital remains high and overall demand shows signs of fatigue, overall liquidity struggles to shift towards more speculative markets.

Bitcoin Stagnation Around $64,000

The crypto market shows remarkable resilience in the face of these macroeconomic difficulties. This apathy sharply contrasts with the significant volatility observed after the release of previous economic data. Upon the announcement of the report figures, Bitcoin remained stable. It thus dropped 0.4% before stabilizing in a range between $63,800 and $64,300, after briefly touching the lower zone of $63,000. It is noted that the leading crypto is experiencing an accumulation phase in the $60,000 zone.

In this perspective, investors are avoiding massive commitments without obtaining clear and solid guarantees regarding the evolution of monetary policy. Furthermore, the absence of a clear catalyst in the market reveals a slowdown in flows, while the bitcoin market wavers under the repercussions of liquidity conditions. In the absence of a signal for monetary easing from the Federal Reserve or a drop in energy prices, the crypto market in general and bitcoin in particular may continue to evolve in an uncertain dynamic.

The coming days will be more than decisive. They will determine whether the current stagnation of bitcoin's price signals a correction or a new phase of accumulation before a probable rebound. The true test of truth is now set for September 11, 2026, when the U.S. government will publish the inflation figures for the month of August.