In a surprising turn for an economy still wrestling with post-pandemic pricing dynamics, the January 2026 Consumer Price Index (CPI) report showed annual inflation at 2.4%—a notch below the 2.5% forecast by Bloomberg-surveyed economists. The monthly CPI rose a modest 0.2% versus the expected 0.3%, signaling a potential shift in the inflation narrative. As financial markets digested the data, Bitcoin’s muted response stood out: rising just 0.26% to trade at $67,210 in the hour following the release.
Cooling Prices Offer Breathing Room—but No Fed Pivot Yet
With inflation cooling, market participants immediately turned to speculation about the Federal Reserve’s next move. Historically, Bitcoin and other riskier assets surge when investors anticipate rate cuts, due to increased liquidity and reduced yields elsewhere. But today’s reading, while softer, was largely in line with expectations, leaving little fodder for overly aggressive bets on immediate monetary easing.
Core inflation—which strips out volatile food and energy prices—matched forecasts at 2.5% year-over-year, down slightly from December’s 2.6%. More importantly, this marks a continued divergence from December’s broader CPI reading of 2.7%, reinforcing hopes that inflationary pressures are indeed softening, albeit slowly. Still, markets remain cautious. The Fed has repeatedly signaled it wants sustained progress before pivoting policy, and despite today’s numbers, inflation remains above its 2% target, which has now been consistently missed for six straight years.
Crypto Traders Learn to Read CPI Like Wall Street Pros
Bitcoin’s evolving macro sensitivity has become increasingly apparent. Where once CPI data mattered little in crypto markets, today’s investors treat inflation numbers the same way as institutional bond traders. In December, Bitcoin fell sharply—around 6%—after CPI came in hotter than expected. Conversely, a cooler November reading sent BTC up nearly 3% in two trading sessions. The volatility underscores a rapid maturation in crypto’s alignment to macroeconomic inputs.
The CME FedWatch tool, prior to today’s release, reflected a 90.3% probability the Fed would keep interest rates unchanged at its upcoming March meeting. Following the CPI release, that probability nudged higher, but traders remain hesitant to price in a rate cut, even for the Fed’s summer meetings. It’s a waiting game—one dominated by data over mere sentiment.
Sticky Food Prices and Weak Labor Add Complexity
Despite headline inflation cooling, consumers continue feeling the pinch at the grocery store. Food prices climbed 2.9% year-over-year, driven by spikes in staples like coffee and beef. It’s a critical detail for Fed policymakers, who are hyper-aware that public perception of inflation often lags behind technical improvements—particularly when necessities like food are involved.
Compounding the picture is weak job growth. Just 181,000 jobs were added across 2025. While the unemployment rate remains below 4%, the stagnation in net employment paints a subdued economic backdrop. Economist Nicole Bachaud bluntly noted:
“The 181,000 jobs that were added across 2025 really starkly show how challenging the labor market was and how little movement on either side there really has been.”
Momentum With Caveats: Will Bitcoin Sustain Gains?
With Bitcoin climbing modestly in the wake of softer inflation, some traders see this as the start of a new leg higher. But the reaction has been tempered for good reason. This CPI report, while positive, doesn’t radically shift the Fed’s outlook. Nor does it erase structural issues in the economy—like persistent core inflation and a tepid job recovery—that could constrain monetary easing.
Moreover, institutional investors—who now make up a larger share of Bitcoin volume—are increasingly cautious. Many are waiting for confirmation that the softening trend in inflation is real and durable, not just statistical noise from a single month’s data. With the next Fed meeting weeks away and economic signals emitting mixed tones, Bitcoin’s immediate future may hinge less on narrative than on numbers.
