Today’s U.S. inflation numbers might just give Bitcoin and other risk assets a nudge if they come in soft. However, those hankering for a major crypto rally might want to temper their expectations. As the U.S. gears up to release January’s consumer price index (CPI) data later this Wednesday, the speculation on crypto prices is palpable but the outcome uncertain. Expected to reveal a modest month-on-month increase of 0.3%, down from December’s 0.4%, the report could influence the Federal Reserve’s next moves on interest rates.
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Soft CPI Could Boost Bitcoin
A softer-than-expected CPI, especially the core figure excluding food and energy, could reinforce hopes for the Fed to ease up on interest rates. This scenario might weaken the dollar and make Treasury yields more attractive, potentially boosting demand for riskier assets like Bitcoin. Current market expectations, pinned by the CME’s FedWatch tool, suggests a 54% probability that the Fed might cut rates once or not at all this year.
Forward-Looking Indicators Hint at Higher Future Inflation
Despite potential good news, forward-looking inflation indicators hint at higher future inflation, dampening hopes for sustained aggressive rate cuts by the Fed. Two-year inflation swaps have hit nearly 2.8%, signaling market anticipation of rising inflation, likely fueled by ongoing trade tensions and tariff impacts. This complicates the Fed’s path to lowering rates, suggesting that any CPI-induced rally in Bitcoin might be short-lived.
What the Experts Are Saying
Major financial players are keeping their expectations in check. RBC’s (RY) latest commentary suggests that even a soft CPI won’t sway the Fed from its current stance. “We don’t expect that progress on inflation will be enough to prompt additional interest rate cuts from the Fed this year,” notes RBC, pointing to persistent price pressures. Similarly, BlackRock (BLK) highlights ongoing services inflation as a key reason the Fed might keep rates higher for longer.
Bitcoin Navigates a Narrow Trading Range
For Bitcoin investors, today’s CPI report is more than just numbers—it could significantly influence market directions. While a cooler CPI could offer a brief lift, the broader economic landscape remains the dominant force. With inflation expected to stay in the spotlight and the Fed maintaining a cautious approach, Bitcoin might find itself confined within the tighter end of its $90K-$110K trading range, especially if the CPI report reveals higher-than-expected figures, according to CoinDesk.
At the time of writing, Bitcoin is sitting at $95,946.30.
