- Inflation has risen in August, but core inflation has slowed.
- Bitcoin has been little changed since the inflation data was released.
- The Fed has closely monitored inflation and signaled a likely interest rate hike in the coming months.
The price of Bitcoin was little changed at $26,100 in the minutes following the release of the inflation data. Analysts had expected bitcoin to fall if inflation data came in higher than expected, as this would have increased the likelihood of the Federal Reserve raising interest rates more aggressively.
Inflation Data Eases Concerns as CPI Matches Expectations
However, the fact that inflation data aligned with expectations appears to have allayed some of these concerns. The Consumer Price Index (CPI) rose 0.6% in August, in line with expectations, following a 0.2% increase in July. On a year-over-year basis, CPI inflation rose to 3.7%, against the forecast of 3.6% and up from 3.2% in July.
The core CPI, which excludes food and energy prices, rose 0.3% in August, also in line with expectations, after a 0.2% increase in July. On a year-over-year basis, core CPI inflation fell to 4.3%, down from 4.7% in July.
Higher prices for food, shelter, and transportation drove the increase in headline CPI. Food prices rose 0.8% in August, the largest increase since February. Accommodation prices rose 0.5%, and transportation prices rose 0.4%.
The slowdown in core inflation was due to a decline in gasoline and other energy products prices. Gasoline prices fell 0.8% in August, the first decline since February.
The Federal Reserve closely monitors inflation and has signaled that it will likely raise interest rates in the coming months to cool the economy and bring inflation under control.
On the Flipside
- Bitcoin’s price stability following the inflation data release does not indicate immunity to economic events.
- Higher interest rates make it more expensive to borrow money, which could discourage investors from taking on risky assets like Bitcoin.
Why This Matters
The rise in inflation is a major concern for the cryptocurrency market. If inflation continues to rise, the Federal Reserve may be forced to raise interest rates, making borrowing money and investing in cryptocurrencies more expensive. Additionally, high inflation can lead to economic uncertainty, dampening demand for cryptocurrencies.
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