U.S CPI Data Released: Inflation Rate Rises To 2.9%, Crypto Market Turns Bullish

The U.S. Consumer Price Index (CPI) report for December, a key gauge of inflation, has just been released by the Bureau of Labor Statistics (BLS). While the CPI data could boost the U.S. dollar, it’s unlikely to prompt immediate adjustments to the Federal Reserve’s monetary policy.

Let’s dive into the details and explore how this impacts the markets, including cryptocurrencies.

Inflation in Line with Expectations

The December inflation data met forecasts, showing a Year-over-Year (YoY) CPI increase of 2.9%, up from 2.7% in November. Core CPI, which excludes volatile food and energy prices, rose by 3.2% YoY, slightly under the 3.3% estimate. On a month-over-month (MoM) basis, the headline CPI climbed 0.3%, while core CPI advanced 0.2%, both aligning with projections.

These figures indicate a modest uptick in inflation, reflecting the Federal Reserve’s ongoing challenges in balancing growth and price stability.

Crypto Market Reacts

The crypto market responded positively to the report, particularly as the December Core CPI rose by only 0.2% MoM, under the anticipated 0.3%. Bitcoin (BTC) prices spiked by $1,000 following the announcement, signaling strong investor sentiment.

Among other cryptocurrencies:

• XRP is trading at $2.85, marking a remarkable 10% surge in 24 hours.
• ETH, SOL, DOGE, and ADA are up by 1.80%, 3.03%, 4.56%, and 7.90%, respectively.

The Fed’s Perspective

The Federal Open Market Committee (FOMC) minutes from December revealed concerns among officials about persistent inflation risks. They highlighted factors such as changes in trade and immigration policies that could complicate inflation control efforts and potentially strain the U.S. economy.

Despite these challenges, market expectations for a significant rate cut remain subdued. According to CME Group’s FedWatch Tool, there’s a 97% likelihood that the Fed will maintain interest rates at their current levels during the January 29 meeting.

Expert Predictions: A Bitcoin Breakout on the Horizon?

Markus Thielen, Head of Research at 10x Research, predicts notable market movement ahead of the January 29 FOMC meeting.

“Bitcoin trades within a narrowing triangle, signaling a breakout is imminent — likely no later than the January 29 FOMC meeting,” he noted on January 14.

Thielen suggests that lower inflation might spark a Bitcoin price surge.

“From a trading perspective, the best approach is to follow the breakout, regardless of direction,” he remarked. 

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Policy Shifts Under the Trump Administration

The incoming Trump administration’s anticipated policies—including stricter immigration controls, a more relaxed fiscal stance, and reimposed tariffs on imports from China and Europe—could further drive inflation upward. These changes may challenge the Federal Reserve’s efforts to manage inflation and could influence future rate decisions.

With the labor market cooling gradually and inflation remaining elevated, the Fed is unlikely to implement drastic policy changes. Market participants foresee a modest 25-basis-point rate cut this year, keeping the U.S. dollar’s outlook stable for now.

For now, the crypto rally suggests that investors are optimistic about inflation stabilizing—a sentiment that could define the market’s trajectory in the weeks to come.

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