The U.S. Consumer Price Index (CPI) rose 0.4% in August, bringing the annual rate to 2.9%, according to the Bureau of Labor Statistics. Core CPI, which excludes food and energy, increased 0.3% from the prior month and 3.1% compared with a year earlier.

Economists had expected headline CPI to rise 0.3% month-on-month and 2.9% year-on-year, while core CPI was projected to climb 0.3% on the month and 3.1% on the year.

Fed Outlook Remains in Focus

The hotter-than-expected CPI reading complicates the Fed’s policy path. While a quarter-point cut next week is still anticipated, the persistence of inflation suggests that additional reductions may be harder to justify. Markets are already scaling back expectations for an extended easing cycle as the central bank navigates the challenge of taming prices without choking off growth.

Rising costs across fuel, food, and services have strengthened the argument that tariff-related pressures are embedding into the economy. For Fed officials, this forces a more cautious stance, with any further cuts likely to be gradual and data-dependent rather than part of an aggressive easing campaign.

Wall Street Expected Reaction

Equities struggled to find direction after the hotter-than-expected CPI data, as investors weighed the risk of sticky inflation against hopes for a Fed rate cut. Higher prices raise concerns that the central bank may be more cautious in its easing cycle, tempering enthusiasm in rate-sensitive sectors. Wall Street is now bracing for greater volatility, with traders closely parsing Fed signals for clarity on how aggressively policymakers can act.

What It Means for Bitcoin

Stronger-than-expected CPI data leaves Bitcoin in a more uncertain spot. While a rate cut next week is still on the table, sticky inflation limits how aggressive the Fed can be, potentially keeping financial conditions tighter than investors had hoped. This could dampen liquidity and risk appetite in the near term.

At present, Bitcoin remains near $114,000, consolidating within a broad range. Market watchers say the next move will depend heavily on the Fed’s tone — if policymakers downplay the inflation risk and stick to easing guidance, Bitcoin could still find support. Otherwise, expectations of slower cuts may keep prices capped in the short run.

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