Today, the critical inflation data that the FED attaches importance to in making interest rate decisions will be announced. The FED held interest rates steady in January and paused interest rate cuts in September, November and December.
In this situation, while the expectation of an interest rate cut extends to June, the CPI data to be announced today is of critical importance.
At this point, while January CPI data in the US is expected to show limited progress in inflation, a below-expected CPI data is expected to be positive for risky assets, including Bitcoin (BTC).
This is because lower-than-expected data, especially core inflation, will support expectations for further rate cuts, which could lead to lower Treasury yields and a weaker dollar index. It could also increase demand for riskier assets like Bitcoin.
However, analysts say that investors expecting a big bull run will be disappointed, and even if there is a rise, it will be limited.
Analysts said that a possible change in interest rate cuts could send BTC higher, but it would not be enough to break out of the ongoing consolidation between $90,000 and $110,000.
What are the CPI Expectations?
Analysts at BlackRock and RBC Capital said they did not expect the CPI data to prompt the Fed to cut interest rates.
According to Coindesk, RBC analysts predict that concerns about the trade war that Donald Trump initiated with his tariff move will increase inflation and cause the FED to approach interest rate cuts more cautiously.
“We do not expect the progress in inflation to be sufficient to prompt the Fed to cut interest rates further this year. We expect the January report to show a limited easing of price pressures.”
BlackRock analysts also said that even if the CPI comes in below expectations, the Fed is unlikely to cut interest rates.
BlackRock analysts said that continued inflation, especially in the services sector, would prevent the Fed from lowering interest rates.
“January US CPI data is due today. Even as the December CPI report shows signs of easing inflation pressures, our view is that wage growth remains above the level that would allow inflation to pull back to the Fed’s 2% target. We see persistent services inflation forcing the Fed to keep rates high for longer.”
What Does Jerome Powell Think?
FED Chairman Jerome Powell stated in his speech at the Senate Banking Committee hearing yesterday that low unemployment and inflation remain above the FED’s 2% target.
Powell said the Fed is in no rush to cut interest rates again, given the generally strong economy.
*This is not investment advice.
