Executive Summary
The Story So Far
Why This Matters
Who Thinks What?
Bitcoin and other major cryptocurrencies experienced an uptick on Friday following the release of a delayed U.S. inflation report, which indicated that consumer prices rose at a slightly slower pace than economists had anticipated in September. The Consumer Price Index (CPI) increased by 3% over the 12 months ending in September, a figure that came in below the 3.1% annual rise projected by Trading Economics.
Market Reaction and Price Movements
In response to the inflation data, Bitcoin, the leading cryptocurrency by market capitalization, climbed approximately 2% to trade around $111,300. This recovery follows a recent drop from $121,000 two weeks prior, fueled by tariff concerns.
Ethereum and Solana also posted gains, rising to $3,960 and $193, respectively, reflecting 24-hour increases of 2.5% and 2.1%. These assets had previously lagged Bitcoin amidst renewed trade tensions between the U.S. and China.
Inflation Details and Federal Reserve Outlook
The September CPI report marked the third consecutive month of inflation cooling after reaching 2.3% in April. Core inflation, which excludes volatile food and energy prices, also softened to an annual rate of 3% in September, down from 3.1% the previous month.
This inflation snapshot arrived as the U.S. government shutdown entered its 24th day, delaying the CPI report by a week. Despite the delay, the Federal Reserve will have sufficient time to review the data before its upcoming policy meeting.
The Federal Reserve is widely expected to implement a quarter-percentage-point interest rate cut at the conclusion of its penultimate rate-setting meeting in 2025. While market expectations for a similar cut in December slightly softened, Fed officials have maintained a cautious approach to lowering borrowing costs this year.
Influences on Policy and Sentiment
Concerns about potential shifts in trade and immigration policies under President Donald Trump have influenced the Fed’s goal of achieving 2% inflation. Federal Reserve Chair Jerome Powell recently noted that there is “no risk-free path for policy,” emphasizing a “meeting-by-meeting approach” to balance employment and inflation objectives.
Sentiment in prediction markets, such as Myriad, reflected a shift towards “Greed” at 58% over “Fear” at 42%. This change occurred after President Trump’s reaffirmation of positive expectations regarding a deal with China, which previously saw “Fear” spike to 57%.
Key Takeaways
The cryptocurrency market’s positive reaction to the cooler-than-expected inflation figures underscores its sensitivity to macroeconomic indicators and Federal Reserve policy expectations. The data provides the central bank with additional context as it navigates its dual mandate amidst ongoing economic and political considerations.
