Cryptocurrency prices remained steady on Wednesday after a widely watched indicator suggested inflation in the United States increased last month.
The consumer price index (CPI) rose 3.7% in the last 12 months through August, the Bureau of Labor Statistics (BLS) reported on Wednesday, slightly above economists’ expectations of 3.6%.
The index rose 0.6% month-on-month in August, after rising 0.2% in both July and June. The relatively larger increase was due to rising gasoline prices, the BLS said, accounting for more than half of the index increase.
According to CoinGecko, after the report was published, Bitcoin was trading at around $26,100, which remained unchanged over the past day. Ethereum was down 0.5% to around $1,600 over the same period, while altcoins such as Cardano and Polkadot also posted slight losses.
Wednesday’s report will be one of several factors, such as the strength of the U.S. labor market and the latest Personal Consumption Index (PCI) numbers, that the Federal Reserve will consider before its next interest rate announcement on September 20.
The Fed has tightened its monetary policy stance in response to inflation, which reached 9.1% last June, the largest annual increase since 1981. Higher interest rates cool the economy by making borrowing more expensive for businesses and consumers.
In addition to slowing economic growth, higher interest rates have hurt cryptocurrencies and other risk assets like stocks as assets like U.S. Treasury bonds have become relatively more attractive to investors.
Although inflation has slowed significantly since its crushing pace last June, its pace is still above the Fed’s annual target of 2%.
The Federal Reserve raised its key interest rate to 5.25% to 5.5% in July, hitting a 22-year high after a rise in June. When the Federal Reserve decided not to raise interest rates in June, it was the first time in 18 months that the Fed got cold feet.
According to CME Group’s FedWatch tool, traders on Wednesday estimated a 91 percent chance the Fed will keep interest rates steady after its meeting later this month, with a 5 percent chance of a cut in January next year.
Cryptocurrency prices fell in August after minutes of the Fed’s latest interest rate meeting were released. The hawkish tones gave traders pause, along with a statement that the Fed “continues to pay close attention to inflation risks.”
