The United States Consumer Price Index (CPI), a widely watched inflation gauge, reported a 3.7% rise year-on-year in August, surpassing economists' expectations of 3.6%, according to data released by the Bureau of Labor Statistics (BLS) on Wednesday. This figure marks an increase from July's rate of 3.2%. The core CPI annual inflation, excluding food and energy prices, came in at 4.3%, matching forecasts, but showing a downturn from July’s 4.7%.
The larger-than-expected rebound in prices could potentially influence the Federal Open Market Committee (FOMC) meeting scheduled for next week, with higher interest rates being a plausible outcome, according to FXStreet analyst Matias Salord. However, these hikes may not be immediate.
Despite the inflation news, Bitcoin's price remained mostly unaffected, continuing to hover above $26,000. While higher inflation typically leads to lower demand for riskier assets such as Bitcoin, the initial response was relatively neutral with only slight bearishness noted.
Altcoins mirrored this reaction with most declines staying within the 1% mark. Among the top altcoins, Polygon’s native token MATIC observed the largest change, declining by 0.73% to trade at $0.5115.
The BLS attributed the relatively larger increase in the CPI to rising gasoline prices, which accounted for over half of the index's increase. The CPI for all items rose 0.6% in August on a month-to-month basis after a 0.2% increase in both July and June.
Inflation has been a focal point for the Federal Reserve since it reached 9.1% last June — the biggest yearly increase since 1981. Although it has fallen considerably since then, it is still above the Fed's target of 2% annually. In response to the soaring inflation, the U.S. central bank increased its benchmark interest rate to between 5.25% and 5.5% in July, a 22-year high.
Higher interest rates have weighed on cryptocurrencies and other risk assets like stocks, making U.S. Treasuries relatively more attractive to investors. Traders anticipate a 91% chance that the Fed will maintain steady rates after its meeting later this month, according to the CME Group's (NASDAQ:CME) FedWatch Tool.
The impact of these inflation figures on the cryptocurrency market will continue to be watched closely by investors and analysts alike.
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