# US inflation held at 3.4% in July, cutting the odds of a Federal Reserve rate increase in September

Traders lowered the implied probability of a September rate increase to about 42% from roughly 72%, and gold rose 1.2% while silver gained close to 3%.

- Published: 2026-08-13T05:22:48.900Z
- Canonical: https://polylog.news/2026-08-13/us-inflation-held-at-3-4-in-july-cutting-the-odds-of-a-feder
- Publisher: Polylog (Global desk)
- Section: macro
- Sources: [CoinDesk](https://www.coindesk.com/markets/2026/08/13/bitcoin-slips-near-usd63-500-as-traders-look-past-cpi-to-fed-s-next-tests), [Globes](https://www.globes.co.il/news/article.aspx?did=1001552203#utm_source=RSS)

The United States Bureau of Labor Statistics reported that the consumer price index rose 0.1% in July and 3.4% over the previous twelve months, down from 3.5% in June. The core measure, which excludes food and energy, rose 0.2% on the month and 2.5% on the year. Both figures [matched the consensus forecast exactly](https://www.cnbc.com/2026/08/12/cpi-inflation-report-july-2026.html), and the [official release](https://www.bls.gov/news.release/cpi.nr0.htm) showed energy prices still 14.7% higher than a year earlier despite falling 1.5% during the month.

The interest rate futures market reacted first. Traders cut the implied probability of an increase at the September meeting to roughly 42%, from about 72% before the release, according to CME Group's FedWatch tool as reported by [CNBC](https://www.cnbc.com/2026/08/12/cpi-inflation-report-july-2026.html). What matters is the direction of that shift. The Federal Open Market Committee, chaired since May by [Kevin Warsh](https://www.federalreserve.gov/newsevents/pressreleases/other20260522a.htm), has left the federal funds target at 3.50% to 3.75% for five consecutive meetings, and the open question is no longer whether policy will ease but whether it will tighten again.

Investors read the inflation report as confirmation that the real return on holding cash stays thin. Gold settled near $4,424 an ounce, up about 1.2%, and silver rose close to 3% to trade above $66, [according to price tabulations published on Wednesday](https://finance.yahoo.com/personal-finance/investing/article/gold-prices-today-wednesday-august-12-2026-holding-over-4400-ahead-of-cpi-report-114442535.html). Gold remains roughly a fifth below the intraday peak it set in late January. With headline inflation at 3.4% and the policy rate at 3.50% to 3.75%, the inflation-adjusted return on holding dollars is close to zero, and that gap is what has supported metals prices through this cycle.

Bitcoin moved differently. It traded near $63,500 after the data, [CoinDesk reported](https://www.coindesk.com/markets/2026/08/13/bitcoin-slips-near-usd63-500-as-traders-look-past-cpi-to-fed-s-next-tests), roughly half its October 2025 peak near $126,000. The gap between gold's and bitcoin's performance has widened all year as investors moved money into artificial-intelligence stocks and out of crypto exchange-traded funds. Stock indexes finished higher, with the S&P 500 up 0.3% at 7,748.50 and the Nasdaq Composite up 0.5% at 26,588.49, while the Dow Jones Industrial Average slipped fractionally. Israeli financial daily [Globes described the global tone as optimism led by artificial intelligence and a strong earnings season](https://www.globes.co.il/news/article.aspx?did=1001552203#utm_source=RSS), while noting that some on Wall Street question how long that combination lasts.

## What this means

A July inflation reading that matched forecasts removes the immediate case for a rate increase, but it does not close the gap between 3.4% price growth and the Federal Reserve's 2% target, so the policy rate stays where it is and cash keeps earning almost nothing after inflation. That gap is the direct channel into gold and silver, which pay no yield and therefore cost little to hold when real interest rates sit near zero. Borrowers with floating-rate debt and export-heavy economies exposed to a strong dollar benefit from the lower odds of a rate increase. Bitcoin is the exception. It is trading on fund flows and competition for capital from artificial-intelligence stocks rather than on the path of inflation.

## What to watch

- Whether energy prices resume rising month to month. Energy fell 1.5% in July but is still up 14.7% on the year, and a reversal would push headline inflation back up and revive the case for a rate increase.
- What Federal Reserve officials say at the Jackson Hole symposium later this month. Chair Kevin Warsh has already rewritten the policy statement once, and any change in how the committee describes its inflation tolerance would reset how traders price the odds of a September move.
- Whether gold and bitcoin keep moving in opposite directions. Both are treated as hedges against monetary debasement, and a sustained split would indicate investors are now pricing the two assets on different drivers.