U.S. Inflation Surprises Markets in January
In a surprising turn of events, U.S. inflation unexpectedly increased in January, causing both cryptocurrency and traditional financial markets to experience significant declines. According to the latest data, the Consumer Price Index (CPI) rose by 0.5% in January, surpassing expectations of 0.3% and December’s rate of 0.4%. On a year-over-year basis, the CPI registered an increase of 3.0%, slightly above forecasts of 2.9% and matching December’s figure.
The core CPI, which excludes volatile food and energy prices, also showed an uptick, rising 0.4% in January, compared to an anticipated 0.3% and a 0.2% rise in the previous month. Year-over-year, the core CPI increased 3.3%, exceeding both the expected 3.1% and December’s 3.2%.
Following the release of this disappointing inflation report, bitcoin (BTC), which had already been trading in a downward trend, saw a sharp decline, dropping below the $95,000 mark. The broader CoinDesk 20 Index also fell, showing a decrease of 2.9% over the past 24 hours.
In reaction to the inflation data, U.S. stock index futures declined by around 1%, while the yield on 10-year Treasury bonds surged by 10 basis points, reaching 4.63%. Gold prices dipped more than 1%, and the dollar index experienced an increase of 0.5%.
Since breaking through the $100,000 threshold shortly after Donald Trump’s election victory in November, bitcoin has been stuck in a trading range between $90,000 and $109,000 for over two months. Factors such as concerns over artificial intelligence in China, the looming threat of trade wars, and higher-than-expected interest rates—driven by ongoing strength in the economy and inflation—have all contributed to this stagnation in prices.
During his recent testimony before Congress, Federal Reserve Chairman Jay Powell emphasized that further rate cuts from the central bank are unlikely in the near future, barring any unexpected downturns in the economy or inflation. Today’s inflation data could pave the way for markets to start anticipating potential rate hikes in 2025 and a possible retest of the $90,000 level for bitcoin.
