In August, the U.S. Consumer Price Index (CPI) increased by 0.4% following a 0.1% rise in July. After the inflation data release, Bitcoin sharply fell to $76,000 but fully recovered within the next half hour.
According to the BLS, annual inflation remained at 3.4%. The core CPI, excluding food and energy prices, rose by 0.3% for the month, exceeding the expected 0.2%. On an annual basis, the rate slowed from 2.5% to 2.4%.
Just before the report’s release, Bitcoin was trading above $77,000 on Binance. Immediately after the release, the price dropped to $76,037. At the time of writing, the digital gold had rebounded, surpassing $78,700.
During the same period, Ethereum rose from a daily low of around $2,432 to $2,623. The current price is $2,603.
Following the lead of these flagship cryptocurrencies, all top 10 assets by market capitalization moved into the “green zone.” According to CoinMarketCap, ZEC (+5.47%) and XRP (+4.56%) showed the most significant growth in the last hour.
Factors Accelerating Inflation
Energy prices were the main factor accelerating inflation: in August, gasoline prices rose by 3.9%, accounting for more than a third of the monthly increase in the overall index.
The energy component of the CPI increased by 2.1% for the month and 16.3% for the year. Housing costs rose by 0.3%, and food prices by 0.1%. Increases were also recorded in hotel rates, airfares, and the prices of new and used cars.
Prices for medical services and auto insurance decreased. The annual trend of core inflation continued to slow, but the stronger monthly figure raised expectations of tighter Federal Reserve policy.
Market Raises Rate Hike Probability
Following the CPI release, the probability of a 25 basis point increase in the Federal Reserve’s key rate at the September 16 meeting rose to 85.6%. Before the data release, traders estimated it at 68%, according to Reuters.
The bond market reaction was mixed. The yield on two-year Treasury notes, sensitive to rate expectations, rose to 4.59%, while the yield on ten-year notes fell to 4.92% after an intraday high of 4.98%. Nasdaq and S&P 500 both gained 0.8%.
Earlier, on August 28, Bitcoin fell below $78,000 following a speech by Federal Reserve Chairman Kevin Warsh.
