UPDATED Investors have been asking themselves the same questions since April: where is inflation headed and how does that impact the US Federal Reserve’s approach to rates?

Thursday’s US Producer Price Index report came in higher than expected, suggesting once again that an increase in inflation may be imminent. The index showed that prices climbed 0.9% in July, the largest monthly hike in three years, outstripping a 0.2% average estimate from a survey of economists.
The gauge is important because it shows price movements before goods reach consumers. A high PPI could translate into higher prices on the store shelf, an inflationary scenario that could stifle the recent global rally in risk assets.
Crypto price drops
The crypto market slid on the news. Bitcoin shed 2% in five minutes after the PPI report at 12:30UTC, slipping further below the all-time high recorded earlier in the day, while Ether (ETH) dropped 3.3%. The CMC100 gauge of crypto assets slumped 3.6% by the end of the day.
However, equities showed a mixed response, with the S&P 500 briefly dropping to 6,441 before closing the day at its all-time high of 6,468.
The Fed pursues monetary policy in such a way that supports the economy while keeping inflation under management. It’s had to battle wild swings in trade after the White House initiated a global tariff war in April, adding new costs to imported goods in the US.
Interest rate cut hopes
Traders hoping the Fed will cut interest rates in September are asking themselves whether the consumer price rises will be sustained or a blip. The central bank has so far resisted political pressure from the White House to ease the cost of borrowing.
A survey of American consumers on Friday worsened the picture. The University of Michigan’s preliminary August sentiment index declined to 58.6 from 61.7 a month earlier and respondents presumed an uptick in inflation.
Long-term demand
This may be a minor setback for crypto prices, as investors from consumers to corporates and financial institutions have ploughed cash into digital assets during 2025, with both Bitcoin and ETH performing very well this year: Bitcoin hit a record $124,500 and ETH rose to close to a four-year high of $4,800 this week.
In addition, there are significant institutional flows into cryptocurrencies. Analyst Charles Edwards, of Capriole, noted, in an X post on Wednesday 13 August, that, “Yesterday institutional Bitcoin buying represented 75% of Coinbase's volume.” This is an important threshold because historically it has led to a price increase. It also reflects demand.
The two top cryptocurrencies closed at about $117,400 and $4,400 on Friday.