Cryptocurrency Prices Trade Sideways as Inflation Grows in the US

Cryptocurrency prices traded sideways on Wednesday after a widely watched inflation gauge showed inflation grew hotter in the U.S. last month.

Inflation Rises Above Expectations

The Consumer Price Index (CPI) rose 3.7% in the 12 months through August, the Bureau of Labor Statistics (BLS) said on Wednesday, coming in slightly above economists’ expectations of 3.6%.

Gasoline Prices Drive Index Increase

The index rose 0.6% in August on a month-to-month basis after a 0.2% bump in both July and June. The relatively larger increase was attributed to rising gasoline prices, the BLS said, which accounted for over half of the index’s increase.

Cryptocurrency Prices Remain Stable

Bitcoin traded hands at around $26,100 after the report’s release, which was flat over the past day, according to CoinGecko. Ethereum had fallen 0.5% during the same period to around $1,600, while altcoins like Cardano and Polkadot saw slight losses too.

Fed to Consider Inflation Data

Wednesday’s report will be one of several factors, such as the strength of the U.S. labor market and recent Personal Consumption Index (PCI) figures, weighed by the Federal Reserve ahead of its next interest rate announcement on September 20.

Higher Interest Rates Impact Cryptocurrencies

The Fed has stiffened its monetary stance in response to inflation that reached 9.1% last June—it was the biggest yearly increase since 1981. Higher interest rates cool the economy by making it more expensive for businesses and consumers to borrow.

Inflation Remains Above Target

Even though inflation has fallen considerably from its sweltering clip last June, its pace remains above the Fed’s target of 2% annually.

Rate Hike Unlikely

Core inflation fell to 4.3% year-over-year in August, a noteworthy drop compared to 4.7% in the twelve months through July. As the Fed mulls another potential rate hike, Butterfill said inflation data for August is unlikely to move the needle. “This report isn’t enough to justify a rate hike at the next Fed meeting,” he said, adding that Bitcoin prices changed little in response to the news.

Fed Expected to Keep Rates Steady

Traders penciled in a 91% chance on Wednesday that the Fed would keep rates steady after its meeting later this month, with a 5% chance of a cut in January of next year, according to the CME Group’s FedWatch Tool.

Cryptocurrency Prices React to Fed’s Interest Rate Stance

Cryptocurrency prices dipped in August after minutes from the Fed’s latest meeting on interest rates were released. Hawkish undertones gave traders pause alongside an affirmation that the Fed “remains highly attentive to inflation risks.”

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