The latest U.S. Consumer Price Index (CPI) data released Wednesday showed consumer prices rising less than expected. According to the Bureau of Labor Statistics, the CPI rose 2.5% on an annual basis through August, coming in lower than an expected 2.6% increase. On a monthly basis, inflation held steady at 0.2%, matching July's figure.

This data suggests that the Fed's aggressive rate-hiking campaign over the past 18 months may be achieving its desired effect of cooling inflation. Despite this seemingly positive economic development, Bitcoin (BTC) 's price experienced a slight dip following the release of the data.

BTC declined slightly to $55,591. Other major cryptocurrencies like Ethereum and Solana also saw modest declines, falling to $2,300 and $130 respectively. However, BTC has since recovered, trading back above $58,000 and gaining 2.5% over the past 24 hours. ETH and SOL have also rebounded slightly, gaining 0.86% and 1.81% respectively.

The fresh inflation data will likely play a crucial role in the Federal Reserve's decision-making process as it prepares for its policy meeting next week. Market expectations for a 0.25% rate cut have strengthened, with the CME Group's FedWatch Tool now indicating an 85% chance of such a move, up from 67% prior to the inflation report.

The labor market also continues to play a significant role in Bitcoin's price movements. Last week, a softer-than-expected U.S. jobs report caused Bitcoin to fall as low as $53,300, underscoring the cryptocurrency's sensitivity to broader economic indicators.