Bitcoin, Ethereum Drop as US Reports Inflation Rose to 3 % in January

The increase in consumer prices last quarter, which indicates that inflation is moving faster in January after hitting a record high over the previous three months, caused the price of bitcoins to rise more than expected.

The Consumer Price Index ( CPI ) rose 3 % in the 12 months through January, the Bureau of Labor Statistics ( BLS ) said Wednesday. Economists expected the index, which tracks rate changes across a wide range of goods and services, to present a 2.9 % yearly increase.

In September, annual inflation had cooled to 2.4 %, per the BLS.

The Bitcoin price dropped to$ 94, 250 on the back of Wednesday’s CPI print, diving 2.3 % in 15 minutes. The price of Ethereum and Solana also fell to$ 2, 600&nbsp, and$ 193, respectively, according to CoinGecko data.

Stripping out volatile food and energy prices, so-called core inflation ticked up to to 3.3 % in January after showing a 3.2 % increase in the 12 months through December. The measure was used to assess underlying inflation tendencies, and it was somewhat hotter than expected from economists.

Bitcoin’s price boomed as the Federal Reserve’s benchmark interest rate was lowered last year from a 23-year high to a target range of 4.25 % to 4.50 %. At their latest policy appointment, however, Fed officials decided not to reduce, standing by a fairly careful position last month.

Officials at the Fed’s December plan meet indicated that they are looking into possible changes in trade and immigration policy as a potential impediment to restoring 2 % price stability. &nbsp,

Fed Chair Jerome Powell was flooded with inquiries about Trump’s business war as he addressed Congress for the first time since his inauguration on Tuesday.

” It’s not the Fed’s job to make or post on tax policy”, Powell said. “]The Fed’s job ] is to try to respond to it in a intelligent, smart way”.

In Powell’s words,” the U.S. central bank is ready to react if the labor market declines or the prices cools.” But the economy remains in solid form, he said, and the Fed does” not need to be in a hurry to change” interest rates, given past week’s breaks.

The Commerce Department’s Personal Consumption Expenditures (PCE ) price index increased less than two weeks ago, indicating that the Fed’s preferred inflation gauge increased by 2.6 % annually in December, an increase from 2.4 % the previous month.

Chance assets like stocks and crypto try to prosper in the midst of lower interest rates, which encourage loans and investing. At the same time, they may lead to inflation.

Market participants now believe that the Fed may significantly reduce costs in 2025, which is unacceptable. Traders on Wednesday penciled in a more than 50 % chance that the Fed delivers just one 25-basis-point rate cut this year, or none at all, according to CME FedWatch.

However, the Fed won’t do its next policy gathering until mid-March. Between Wednesday’s prices write and Fed officials’ future action, there is still plenty of time for more data.