Bitcoin News Today: Rising Inflation Expectations Challenge Fed's Rate Cut Strategy

U.S. inflation expectations have risen to 3.2% in August 2025, marking a three-month high, according to the Federal Reserve Bank of New York. This follows a decline in median year-ahead price change expectations for specific categories such as college education, rent, and medical care, while expectations for gas and food prices remained unchanged for the third consecutive month. The three-year and five-year inflation expectations held steady at 3% and 2.9%, respectively Trading Economics^[2].

The Federal Reserve Bank of Cleveland's inflation expectations model estimates the expected rate of inflation over the next 30 years, incorporating Treasury yields, inflation data, and survey-based measures. The model's latest output indicates persistent inflationary pressures, with the 10-year expected inflation estimate reflecting investors' assessment of risks tied to unexpected changes in inflation and real interest rates Federal Reserve Bank of Cleveland^[1].

Official annual inflation data for the U.S. rose to 2.9% in August 2025, up from 2.7% in July, based on U.S. Bureau of Labor Statistics (BLS) data. This follows a steady decline in inflation from the 8.0% peak in 2022. The New York-Newark-Jersey City metro area reported an annual inflation rate of 3.2%, exceeding the national average. Regional disparities highlight higher price pressures in urban centers, driven by elevated shelter costs and energy prices U.S. Bureau of Labor Statistics^[3].

The crypto market reacted to these inflation signals, with spot Bitcoin and Ether ETFs experiencing outflows in late August. Ether ETFs saw a net outflow of $164.64 million, reversing five consecutive days of inflows, while Bitcoin ETFs recorded $126.64 million in outflows. Analysts attribute this trend to investor caution amid the Federal Reserve's release of hotter-than-expected core inflation data, which showed a 2.9% annualized rise in July-the highest since February 2025. The outflows coincided with growing concerns over inflationary pressures under President Donald Trump's trade policies, including tariffs that raised import costs The Block^[5].

Despite the uptick in inflation, market pricing still anticipates a Federal Reserve rate cut at its next meeting, contingent on further labor market weakening. The CME FedWatch tool showed a 93% probability of a September cut after the July inflation report, though Fed Chair Jerome Powell's focus on 12-month inflation metrics remains a constraint. Crypto prices, including Bitcoin and Ether, initially rose post-data release as traders interpreted the softer headline CPI as a bullish signal, but analysts caution that persistent core inflation could reintroduce volatility ScienceDirect^[6].

Historical context reveals a broader trend of inflation moderation since 2022. The U.S. annual inflation rate has declined from 8.0% in 2022 to 2.9% in August 2025, with core inflation averaging 3.1% over the past year. Regional data underscores the uneven impact of inflation, with lower-income households facing higher effective inflation rates (3.4%) due to their disproportionate spending on food, energy, and housing compared to higher-income groups (2.4%) .

The interplay between inflation expectations and crypto markets remains a focal point. A study on cryptocurrency futures markets found that inflation expectations positively correlated with futures prices in 2022 but turned negative post-2022 due to market turbulence linked to events like the Luna and FTX collapses. This suggests that while crypto assets may hedge against inflation in stable periods, systemic risks can erode their effectiveness The World Data^[7].