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The cryptocurrency market, known for its sensitivity to macroeconomic events, recently saw volatility ahead of the release of key inflation data.

Inflation nudged higher in July, according to a measure favored by the Federal Reserve as it prepares to cut interest rates for the first time in more than four years.

The Commerce Department said Friday that the personal consumption expenditures price index increased 0.2% for the month and 2.5% from the same time a year ago, perfectly in line with the Dow Jones consensus estimate.

Fed policymakers prefer to focus on the core reading as a stronger indicator of long-term trends. On the 12-month basis, both core and headline inflation remained unchanged from June.

In recent days, policymakers such as Chair Jerome Powell have voiced optimism that inflation is returning to the Fed's 2% target.

In the past week, the Fed Chair stated that "the time has come for policy to adjust," raising hopes for a rate cut at the central bank's next meeting. Powell, however, declined to disclose specifics about the timing and scope of the cut.

Crypto market reacts

The crypto market fell as investors anticipated the latest batch of inflation data. Several crypto assets are presently in the red. Bitcoin was down 2.97% in the last 24 hours; Ethereum, Shiba Inu, Solana and Chainlink were posting losses between 3% and 6%.

FET, TAO, WIF and Floki were posting significant losses between 7% and 18%.

Dow Jones reported that the Federal Reserve's favored inflation indicator grew 0.2% in July, matching economists' predictions. The PCE reading, a broad measure of what consumers pay for a variety of goods and services, could offer more guidance on the outlook for interest rates.

In the days ahead, market participants will watch to see how the crypto market reacts to the recently released data. However, in the very short term, the crypto market faces selling pressure.