U.S. September CPI Disappoints, Rising a Faster Than Expected 0.2%

Bitcoin fell, with the news likely to further raise the odds of a Fed pause at the its next policy meeting in November.

The U.S. Consumer Price Index (CPI) rose 0.2% in September, exceeding economist forecasts of 0.1% and the 0.2% increase observed in August.

However, the rate of inflation slowed down compared to the past few months, largely driven by a decrease in energy costs.

Economists had anticipated a 0.1% rise in the headline CPI, excluding food and energy costs, known as core CPI. Instead, the core CPI increased by 0.3%, following the 0.3% rise in August.

The year-over-year CPI was higher by 2.4%, lower than the 2.5% increase observed in August and below economists' forecasts of 2.3%.

The core CPI was higher year-over-year by 3.3%, exceeding expectations of 3.2% and the 3.2% increase observed in August.

Bitcoin (BTC) fell further after the report, last trading at $60,800, down nearly 2% from 24 hours prior.

The price of bitcoin had come under pressure in recent days as the prospect of a U.S. Federal Reserve pause in interest rate cuts at its next meeting in early November appeared to be increasing.

The Fed surprised many in September by beginning its rate-cutting cycle with a larger 50 basis point rate cut instead of the assumed 25 basis point move.

The action sparked a sizable rally in crypto prices as investors factored in not just that rate cut but expectations of an equally large move at the Fed's next policy meeting in early November.

But thanks to hawkish comments from Fed Chair Jay Powell (and other central bank officials) and a far stronger than expected employment report last Friday, those expectations have undergone a major reversal over the past ten days, perhaps contributing to the big pullback in crypto prices over that time frame.

According to CME FedWatch – which does the service of converting pricing in short-term interest rate markets into odds on what the Fed will do at each of its policy meetings – the chances for a 50 basis point rate cut in November have gone to zero.

In fact, rate markets prior to this morning's inflation data had priced in a 26% chance the Fed doesn't trim rates at all – up from 0% one week ago.

Today's inflation numbers are likely to reinforce the idea that the Fed may pause any rate cuts in November, but offsetting the disappointing CPI might be some weak employment data.

Initial jobless claims – which had pretty much flatlined at very low levels for many weeks – shot higher to 258,000 last week from 225,000 previously and versus forecasts for 230,000. It's unclear, though, how much the aftermath of Hurricane Helene might have affected the data.