Bitcoin recovered above $78,000 after US inflation data for August matched forecasts, although traders on Polymarket sharply increased the implied chance of a 25-basis-point Federal Reserve rate rise next week to 81%.
The Consumer Price Index rose 0.4% between July and August and was 3.4% higher than a year earlier, according to the US Bureau of Labor Statistics. The annual figure was unchanged from July and remained above the Federal Reserve’s 2% target ahead of its 15-16 September policy meeting.
Bitcoin had earlier fallen below the psychologically important $77,000 level. TradingView data cited in the source report showed it moving back above $78,000 after the CPI figures were released at 08:30 Eastern time.
Ether also recovered above $2,500, while Solana moved back above $100. The three levels had acted as significant psychological thresholds during the previous market decline.
Energy costs drive monthly inflation
Energy prices accounted for much of the monthly increase. The energy index rose 2.1% in August, with petrol prices up 3.9% and responsible for more than one-third of the headline CPI rise. Shelter costs increased 0.3%, while food prices rose 0.1%.
Energy inflation reached 16.3% over the year, including a 27.4% increase in petrol prices and a 52% rise in fuel oil. Food prices were 2.7% higher than a year earlier, while food purchased for consumption at home increased 2.2%.
Core CPI, which excludes food and energy, rose 0.3% month-on-month. That was above the 0.2% forecast cited in the source report, although annual core inflation slowed from 2.5% in July to 2.4% in August – its lowest figure since 2021.
Shelter costs rose 3% annually and services excluding energy services also increased 3%. During August, airfares rose 2.7%, lodging away from home 2.4% and communication costs 2.3%. Used vehicle prices increased 0.4% and new vehicles 0.3%.
Medical care costs fell 0.2%, including a 0.6% decline in dental services. Motor vehicle insurance dropped 0.8%, while recreation and apparel prices were unchanged.
Rate-rise expectations increase
Polymarket traders put the probability of a quarter-point increase at 81% after the figures, according to MarketWatch’s live coverage, compared with about 59% beforehand. The implied chance of no change fell from 41% to about 20%.
The figures are market wagers rather than an official Federal Reserve forecast or a direct indication of how Federal Open Market Committee members will vote.
The federal funds target range is currently 3.50% to 3.75%. A quarter-point rise would move it to 3.75% to 4% and would be the first increase since July 2023.
A September policy analysis published before the CPI report said CME FedWatch had indicated a 66% chance of a quarter-point rise. Polymarket odds had previously reached 72% after Fed Governor Michael Barr supported a decisive response if inflation failed to ease.
Bitcoin had also been affected by stronger-than-expected employment data and the previous day’s producer inflation report. US employers added 162,000 jobs in August, compared with a Reuters forecast of 56,000, while unemployment remained at 4.1%. Average hourly earnings rose 0.3% from July and 3.1% year-on-year.
Bitcoin initially climbed to about $82,262 after the jobs report but later fell below $80,000. Fed funds futures then priced a 61% chance of a September increase, up from 52%, while two-year Treasury yields rose five basis points to 4.38% and the 10-year yield reached 4.776%.
Before the latest data, analysts identified $75,000 as support and $82,000-$86,000 as resistance. Bitcoin gained 25% in August, while US spot Bitcoin exchange-traded funds recorded $3.52bn of inflows across 16 of 21 trading sessions.
Oil supply remains an inflation risk
Brent crude stayed above $100 on Friday despite falling almost 4%. Folha reported that it moved towards $104 after nearing $110 earlier in the session.
The decline followed reports of a possible meeting between Iran and Gulf states, but shipping risks remained after Iran-backed Houthi forces captured Perim Island in the Bab al-Mandab Strait, a major oil and commercial shipping route between the Red Sea and Gulf of Aden.
The European Central Bank raised its deposit rate by 25 basis points to 2.5% one day earlier, citing persistent inflation, energy-price pressures and the conflict in the Middle East. It said eurozone inflation could remain above its 2% target for an extended period.
The International Energy Agency said attacks on oil tankers and facilities had disrupted supplies, while Saudi output had fallen to 6 million barrels per day. It forecast global oil supply would decline by 5.7 million barrels per day in 2026.
