Inflation rate rises to 2.9%, and the cryptocurrency market turns bullish

the US Consumer Price Index (CPI) report. A key measure of inflation for December was just released by the Bureau of Labor Statistics (BLS). While CPI data could boost the US dollar, it is unlikely to lead to immediate adjustments to the Federal Reserve’s monetary policy.

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

Inflation is in line with expectations

December inflation data was in line with expectations, showing a year-on-year increase in the CPI of 2.9%, up from 2.7% in November. The core CPI, which excludes volatile food and energy prices, rose 3.2% year-on-year, slightly below estimates of 3.3%. On a monthly basis, the headline CPI rose 0.3%, while the core CPI rose 0.2%, both in line with expectations.

These numbers indicate a slight increase in inflation, reflecting the ongoing challenges the Federal Reserve faces in achieving a balance between growth and price stability.

Crypto market reaction

The cryptocurrency market responded positively to the report, especially since the core CPI for December rose just 0.2% month-on-month, below expectations of 0.3%. Bitcoin (BTC) prices rose by $1,000 following the announcement, indicating strong investor sentiment.

Among other cryptocurrencies:

• XRP It is trading at $2.85, recording a remarkable 10% rise in 24 hours.
• Ethereum, Sol, Dougand Ada They increased by 1.80%, 3.03%, 4.56%, and 7.90%, respectively.

The Fed’s view

Minutes from the Federal Open Market Committee (FOMC) meeting released in December revealed concerns among officials about persistent inflation risks. They highlighted factors such as changes in trade and immigration policies that could complicate efforts to control inflation and potentially put pressure on the US economy.

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

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Markus Thelen, head of research at 10x Research, expects notable market movement ahead of the FOMC meeting on January 29.

“Bitcoin is trading within a tight triangle, suggesting a breakout is imminent – ​​likely no later than the January 29 FOMC meeting.” male On January 14th.

Thelen points out that lower inflation could lead to higher Bitcoin prices.

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

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Political transformations under the Trump administration

The expected policies of the incoming Trump administration – including stricter immigration controls, a more relaxed fiscal stance, and the reimposition of tariffs on imports from China and Europe – could push inflation higher. These changes may pose a challenge to the Federal Reserve’s efforts to manage inflation and could impact future interest rate decisions.

With the labor market gradually slowing and inflation remaining high, the Fed is unlikely to implement radical policy changes. Market participants expect a modest interest rate cut of 25 basis points this year, keeping the US dollar outlook stable for the time being.

Right now, the rise in cryptocurrencies suggests that investors are optimistic about stabilizing inflation – a sentiment that could determine the course of the market in the coming weeks.

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