U.S. CPI Inflation Falls To 2.4%, Bitcoin Rises

The U.S. CPI inflation has come in cooler than expectations, providing a bullish outlook for the crypto market, with Bitcoin rising amid this data release. Notably, crypto traders have again increased their bets on Fed rate cuts for this year following this macro data.

CPI Inflation Comes In At 2.4%, Bitcoin Climbs

Bureau of Labor Statistics data show that the CPI rose 2.4% year over year (YoY) in January, below expectations of 2.5%. Notably, this marks its lowest level in over four years, signaling that inflation may be trending towards the Fed’s 2% target.

Meanwhile, the CPI inflation data came in at 0.2% month-over-month (MoM), below expectations of 0.3%. Furthermore, Core CPI came in at 2.5% YoY, in line with expectations, and the lowest level since 2021, while it rose to 0.3%, also in line with expectations.

The January data aligns with Wall Street’s prediction of a soft inflation reading, lower than the figures recorded in December. Bitcoin climbed on the back of this data release, rising to as high as $67,500. TradingView data shows that the leading crypto is now trading at around $67,000, up over 1% on the day.

The CPI inflation reading is a positive for the BTC price and the broader crypto market, as it strengthens the case for additional Fed rate cuts. Moreover, it comes at a time when some Fed officials, including Fed Presidents Beth Hammack and Lorie Logan, are signaling their support for a pause in more cuts over concerns that inflation is rising.

Furthermore, the CPI release follows the strong U.S. jobs report earlier this week, which reduced expectations for the number of rate cuts this year, as it suggested the labor market is rebounding. However, with this soft CPI inflation reading, crypto traders are increasing their bets on the number of rate cuts that the Fed could make this year.

Odds Of Three Fed Rate Cuts Rise Again

Polymarket data show the odds of three Fed rate cuts this year have climbed again to 26%, up from 24%. CoinGape reported earlier this week that crypto traders had reduced their bets on the number of cuts this year, favoring two cuts over three.

As market commentator The Milk Road also noted, following the CPI inflation release, traders are now also pricing in the possibility of a cut in April, with there being a 30% chance of that happening. This is significant because these traders weren’t expecting any cut until June, when a new Fed chair will take office.

The Milk Road noted that if inflation continues to trend lower, then a rate cut could happen before June. They added that the CPI is also timely as it helps stabilize sentiment after yesterday’s sharp market sell-off, with investors needing a calming point.