Today marks a pivotal moment for cryptocurrencies as the inflation report is set to be released. The report from December was deemed unreliable due to a government shutdown, which resulted in incomplete data. Following last week’s stronger-than-expected employment report, today’s developments are critical for the U.S. economy. What makes this report so significant, and what are the expectations surrounding it?
The U.S. Inflation Report
Last week’s employment figures exceeded expectations, resulting in a slight decrease in the unemployment rate from its recent high. The bulls have primarily anticipated that while employment contracts, inflation will be limited, leading to continued interest rate cuts. However, last week’s employment numbers have indicated that the Federal Reserve (Fed) may not need to hurry in reducing rates due to concerns over a potential unemployment spike, reinforcing beliefs that no cut will occur until May when Powell exits.
Should today’s inflation data meet or exceed expectations, the notion that interest rate cuts are unnecessary will be bolstered, possibly ushering in a period where Fed members adopt a “let’s wait and see” approach without urgency.
Most Fed members are advocating for a maximum of two rate cuts this year, with employment data currently supporting these expectations. If inflation figures meet or surpass expectations, this sentiment will be further strengthened, and even with a new chair post-Powell, any rate adjustment will heavily depend on their commitment to data.
If today’s inflation report falls short of expectations, we might see an upward trend for cryptocurrencies; conversely, exceeding expectations could lead to a decline. The expected U.S. Consumer Price Index (CPI) is 2.7%, with the Core CPI estimated to reach 2.7% compared to last month’s 2.6%. Although current interest rates are above inflation, the persistent inflation rate and its four-year stay above target levels are concerning for many Fed members.
Pay Attention to Cryptocurrencies
Bitcoin continues to experience significant fluctuations, particularly during this 24-hour period that is crucial due to both the inflation report and a potential Supreme Court decision on tariffs. Yesterday, Trump warned that a ruling against tariffs could have dire consequences for the U.S. economy. With expectations that the Supreme Court will void the tariffs, Trump heightened fears by predicting trillions in economic loss.
Amidst these developments, threats against Powell for avoiding rate cuts complicate the scenario further. If today’s reports indicate postponing rate cuts, and Powell continues to make statements suggesting he will be imprisoned if he doesn’t cut rates, this could harm the “Fed’s credibility,” subsequently impacting cryptocurrencies negatively.
