Soft U.S. inflation data for August is — at least temporarily — pushing crypto prices higher early Wednesday.The Producer Price Index (PPI), which measures inflation at the wholesale level, fell 0.1% month-over-month in August, compared to analyst estimates of a 0.3% rise and the previous month's 0.9% increase. Year-over-year, PPI grew by 2.6%, down from 3.1% previously and sharply lower than forecasts for 3.3%.The core PPI, which strips out food and energy costs, also fell 0.1% in August verus a forecats rise of 0.3% and July's rise of 0.7%. Year-over-year core PPI rose just 2.8% against estimates for 3.5% and July's 3.4%.Reaction in crypto markets was swift, with bitcoin (BTC) rising to $113,700 at press time, ahead more than 1% over the past 24 hours. Ether (ETH) rose by a similar amount and Solana's SOL (SOL) continued recent outperformance, up 3.3% to $224.This latest PPI reading followed July's blowout PPI increase that reignited inflation concerns amid a quickly weakening labor market. Traders will monitor tomorrow's Consumer Price Index (CPI) inflation report, a key data point to asses ahead of the Fed's interest rate decision next week."That's exactly the PPI data we should cheer for, assuming that it will help to suppress CPI inflation, end the recent streak of re-inflation, and allow the Fed to focus explicitly on recent labor market weakness," said Caleb Franzen, founder of Cubic Analytics, in an X post.Bulls have reason for cautionAll things being equal, it's generally assumed that easier monetary policy is good for risk assets, crypto among them.The past month has seen Federal Reserve Chair Jerome Powell flip from hawk to dove and now a string of weak economic reports possibly pointing to the need for a series of central bank rate cuts. And yet, bitcoin has struggled — rising as the news from Powell or the reports hit, but then pulling back just as quickly.Bitcoin's price action has been particularly perplexing as gold has behaved exactly the way investors might expect — pushing to what seems like new record highs with each fresh dovish news item.While traders continue to overwhelmingly expect the Fed to cut rates by 25 basis points at its policy meeting next week, they've upped bets on a possible 50 basis point move. According to CME FedWatch, the odds of a 50 point cut have now risen to 10% versus 7% prior to the PPI report and 0% one week ago.