The consumer price index (CPI), the most widely tracked benchmark for inflation, rose 8.6% on a year-over-year basis in May, topping expectations that it would decline to 8.2% from April’s 8.3%. The core CPI – which strips out food and energy costs – rose 6% year over year in May, dipping from April’s 6.2%, but more than expectations for 5.9%.

On a monthly basis, the CPI rose 1% in May, ahead of expectations for a gain of 0.7%, and more than tripling from April’s 0.3% advance. The core rate rose 0.6% in May, flat from April but higher than expectations for 0.5%.

The unexpected fresh four-decade high of 8.6% in headline inflation is problematic for monetary policymakers who are in the middle of a rate hike cycle but may have been eyeing a pause at some point later this year. Now the question may be whether the U.S. Federal Reserve needs to raise rates by 75 basis points per meeting rather than the planned 50 basis points.

Bitcoin (BTC) – along with nearly all assets – has taken a major hit as western central banks have begun tightening monetary policy over the past few months. BTC has dipped to $29,500 from $30,000 in the minutes after the report. It remains off by about 65% from its all-time high hit in the fourth quarter of 2021.

“There are certainly positive signs that would indicate the worst [on inflation] is behind us,” said Jonathan Silver, founder and CEO of Affinity Solutions, a global insights firm tracking consumer purchasing habits.

“The job market remains strong, which is putting money in people’s pockets. However, price increases are still outpacing people’s paychecks. Hopefully, this trend will reverse itself as inflation reaches its peak and begins to dissipate. Our purchase spending data suggests that this is the direction we are headed,” he said.

Friday’s inflation report is the last major economic indicator that the Fed sees before its next meeting June 14-15, at which time the central bank is widely expected to raise its benchmark federal funds rate by another 50 basis points, in what would be the third rate hike this year.

Federal Reserve Bank of Atlanta President Raphael Bostic hinted in late May about the possibility of pausing rate hikes in September if inflation moves in the right direction. That was seemingly shot down by Fed Vice Chair Lael Brainard days later, who said it’s “very hard to see the case” for any pause in the tightening cycle.

“If we do begin to see a reduction in the CPI number as expected I do think we will see that reflect well within all markets signaling that the tide is beginning to flow in the correct direction and we should see some more risk on investment come back to the markets with both BTC and total market seeing some increased volumes and price action,” Howard Greenberg, cryptocurrency educator at Prosper Trading Academy said. “A negative number would cause a much bigger downside event than the expected or even a slightly better than expected number has to the upside.”