CPI and PPI climb, crushing hopes for cheap money and leaving Bitcoin traders with an expensive dilemma

US consumer prices increased faster in August, giving the Federal Reserve another reason to be cautious about lowering interest rates and leaving Bitcoin investors exposed to a prolonged period of expensive borrowing.

The Consumer Price Index (CPI) rose 0.4% from July, when it increased 0.1%, while the annual inflation rate held at 3.4%. Excluding food and energy, prices rose 0.3%, compared with 0.2% a month earlier, even as the annual core rate eased to 2.4% from 2.5%.

Thursday's producer price report (PPI) showed a 0.4% monthly increase and a 5.4% annual gain. Energy accounted for much of the increase in both reports, although the faster monthly core CPI reading showed that consumer inflation also picked up outside fuel and food.

That combination weakens the argument that slower annual inflation will soon bring lower interest rates. Investors holding cash can continue earning interest elsewhere, while those borrowing to invest face financing costs that reduce what they can earn from an increase in Bitcoin's price.

The Fed's Sept. 15–16 meeting will put those costs back in the spotlight. The releases will enable officials to keep policy restrictive, but their decision will also depend on employment and their assessment of how long the latest price increases will last.