The release of the latest U.S. Consumer Price Index (CPI) figures in September 2025 once again placed inflation and Federal Reserve (Fed) policy in the spotlight.
CPI Data and Its Significance
The August 2025 CPI report showed a year-over-year increase of 2.9%, up from 2.7% in July. Core CPI, which excludes more volatile food and energy components, registered 3.1%. This indicates that while inflation has cooled dramatically from the peaks of 2022, when CPI surged above 8%, it still remains above the Fed’s long-term 2% target.
Impact on Fed Rate Cut Expectations
The Fed’s policy path is strongly shaped by inflation. When CPI data runs hot, the central bank has less room to cut interest rates aggressively. The latest report underscored the persistence of ‘sticky’ inflation, especially in core categories. Analysts now expect a more cautious 25 basis point reduction instead of the previously anticipated 50.
Response in Traditional and Crypto Markets
Following the CPI release, major asset classes reacted swiftly. U.S. stocks saw a pullback as investors reassessed the likelihood of rapid rate cuts. Conversely, digital assets like Bitcoin and Ethereum initially dropped but stabilized shortly thereafter, reflecting investor expectations of gradual Fed easing.
The August 2025 CPI data is another reminder of how closely inflation, monetary policy, and market performance are intertwined. While inflation remains above target, there are moderate positive prospects for cryptocurrencies moving forward.
