The August CPI report became a key focus for financial markets after Fed Chair Kevin Warsh indicated two weeks earlier that the central bank could be forced to act if inflation failed to moderate.
U.S. consumer prices largely matched expectations in August, but stronger-than-anticipated core inflation kept the prospect of a Fed rate hike next week firmly on the table.
The Consumer Price Index rose 0.4% in August, matching the 0.4% forecast and accelerating from July’s 0.1% increase. On an annual basis, headline inflation reached 3.4%, matching both expectations and July’s reading.
Core CPI, which excludes food and energy costs, increased 0.3% from the previous month, exceeding the 0.2% forecast and July’s 0.2% rise.
On a yearly basis, core inflation stood at 2.4%, matching expectations but easing from July’s 2.5%.
Bitcoin initially came under pressure following the release, falling to around $76,700 within minutes of the data.
The two-year Treasury yield rose six basis points to 4.61% as traders began pricing in almost a 100% probability of a rate increase at next week’s Federal Reserve meeting. The 10-year yield, which is less sensitive to immediate Fed policy expectations, held steady at 4.95%.
Nasdaq 100 futures climbed as much as 0.8% to reach a session high.
The August inflation figures had taken on greater significance over the previous two weeks after Warsh’s remarks at Jackson Hole suggested that the Fed might need to respond if price pressures did not begin to ease.
Those comments triggered a major shift in bond-market expectations. Traders moved from anticipating no additional rate increases, potentially through the rest of 2026, to preparing for as much as 75 basis points of tightening this year.
The repricing drove the 10-year Treasury yield from around 4.60% to just below 5.00% ahead of the CPI release. Meanwhile, the two-year yield, which more closely tracks expectations for Fed policy, climbed from 4.20% to 4.56% before the inflation data was published.
