Bitcoin and Traditional Markets Drop After the US CPI Report Indicates Higher Inflation and Consumer Price Surge than Expected

The crypto markets have taken a hit after the release of the U.S. January Consumer Price Index report, which indicated a higher inflation and consumer price surge than expected.

The crypto markets experienced a downturn following the release of the U.S. January Consumer Price Index report, which indicated a higher inflation and consumer price surge than expected. The CPI rose by 0.5% month-on-month, measuring the cost of consumer products, raising inflation to 3.0%. The current CPI value was higher than the previous expectations of a 0.3% rise and inflation settling around 2.9%.

The U.S. Bureau of Labor Statistics also reported that CPI Core, which excludes energy and volatile food prices, rose 0.4% month-on-month, placing the year-on-year value at 3.3%. The rise was 0.1% higher than the predicted 0.3%, while the CPI Core value was 0.2% higher than the expected 3.1%. The inflation acceleration in January was higher than in the past three months.

Bitcoin dropped after the announcement to $34,250, over 2% lower than yesterday’s price. The coin has since then recovered above $35,500, but is still over 1.5% lower in the past 24 hours. Ethereum also dropped by over 2% to around $2,600, while Solana dropped by around 3.7% to around $192. Other coins, including DOGE, SUI, XRP, LINK, and XLM, were also in red after the CPI report’s release.

The crypto market cap has dropped by 1.58% overall to $3.14 trillion, while the Crypto Greed and Fear Index has dropped to 35 compared to yesterday’s 37. Stablecoins, including USDT and USDC, have still maintained their prices and stayed in the green zone. BNB, Monero, and Axie Infinity are some of the cryptos that have gained traction despite the market shakiness, gaining 3.49%, 0.7%, and 1.2%, respectively.

Traditional markets also took a hit following the CPI announcement. Stocks and bonds both experienced a downturn, with U.S. stock futures dropping by about 1% each. The Dow Jones Industrial Average plunged by 1% to 44,269. The Nasdaq Composite and S&P 500 dropped by 1.1% and 1.2% to 6,028 and 21,529, respectively. According to Reuters, the drop in stock futures indices pointed toward a weak open on Wall Street.

When the markets opened, U.S. stocks experienced a sharp selloff. Top stocks, including Nvidia, Meta, and Amazon, dropped significantly. Bond yields also spiked sharply after the announcement, with the 2-year yield surging to 4.37% and the 10-year yield spiking to 4.65%. The small companies’ stocks index, the Rusell 2000, fell by 1.4%, taking a greater hit compared to large companies’ stocks.

Economists argued that the future indicators highlighted the possibility of inflation rising further in the coming months. According to FwdBonds chief economist Chris Rupkey, the inflation ‘nightmare’ was far from over for businesses, investors, and other consumers, adding that the inflation report was ‘bad news’ for the Federal Reserve officials.

The recent report also led to speculation about President Trump’s decisions on tariffs, which could increase consumer prices for imported goods in the U.S. The president expressed his intentions to raise tariffs on imports from Canada and Mexico by 25% while initiating 10% tariffs on all imports from China.

The recent inflation rise has sparked speculation that the Federal Reserve will reconsider its rate cuts. The Fed faced backlash for its September rate cuts for the first time in four years, with mentions that the cuts were unnecessary.

Crypto analyst Scott Melker (The Wolf of All Streets) tweeted that the Fed rate cuts were too early and that the central bank had no need to take action. Melker reasoned that the inflation rate was steadily dropping, stocks were improving, and the job market was strengthening.

Orion’s Senior Investment Strategist Ben Vaske commented that the Fed would have to rethink its rate cut pace, referring to the 3 cuts initiated in Q4 last year. ClearBridge Investments analyst Josh Jamner agreed, saying that the current inflation report was ‘the final nail on the coffin’ and that the rate cut cycle was over.

Despite the Fed chair Jerome Powell’s statement that the bank was putting a hold on rate cuts, President Trump has still expressed his interest in cutting rates further. The president suggested that interest should continue dropping in readiness for the suggested tariffs.