The August CPI release became a major market event after Fed Chair Kevin Warsh said two weeks earlier that the central bank could need to respond if inflation failed to cool in the near term.

U.S. consumer inflation largely matched expectations in August, but a stronger-than-forecast increase in core prices reinforced expectations that the Federal Reserve could raise interest rates at next week’s meeting.

The CPI increased 0.4% month over month in August, matching the 0.4% estimate and rising from July’s 0.1% gain. Annual headline inflation remained at 3.4%, matching both forecasts and the previous month.

Core CPI, which excludes food and energy, advanced 0.3% from July. That was higher than the 0.2% increase economists had projected and July’s 0.2% rise.

Core inflation increased 2.4% over the year, matching expectations but slowing from July’s 2.5%.

Bitcoin reacted lower after the report, dropping to roughly $76,700 shortly after the figures were released.

The two-year Treasury yield rose six basis points to 4.61%, with traders assigning almost a 100% probability to a Fed rate hike next week. The 10-year Treasury yield was little changed at 4.95%.

Nasdaq 100 futures also advanced, reaching a session high of 0.8%.

The August CPI figures had attracted heightened attention following Warsh’s comments at Jackson Hole. He suggested the Fed may have to take action if inflation failed to show meaningful signs of slowing.

His remarks contributed to a sharp repricing in bond markets. Investors shifted from expecting no further rate increases, potentially through the rest of 2026, toward anticipating as much as 75 basis points of tightening this year.

As rate expectations changed, the 10-year Treasury yield climbed from about 4.60% to just below 5.00% ahead of the CPI release. The two-year yield, which is more closely tied to expectations for Fed policy, increased from 4.20% to 4.56% before the latest inflation data.