Consumer prices unexpectedly rose 3% year on year, putting further pressure on the Federal Reserve to pause future rate decreases.
Higher inflation typically drives cryptocurrency prices lower.
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Posted February 12, 2025 at 9:40 am EST.
The Bureau of Labor Statistics (BLS) Consumer Price Index (CPI), a measure of average consumer prices, rose 0.5% in January, higher than analyst predictions. The CPI increase was 3.0% year over year, also bigger than the 2.9% year over year CPI increase in December.
Core CPI, a measure of the change in goods and services prices less food and energy, was two points higher than the month prior at 0.4%, versus 0.3% expectations and 0.2% in December. Core CPI year over year rose slightly to 3.3%, compared to analysts forecasts of 3.1% and 3.2% in December.
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CPI Up, Bitcoin Down
Immediately after the release at 8:30 am, bitcoin’s price dropped by almost 2% from $96,600 just above $94,000 before starting a slow recovery. During the decades-high inflation during the pandemic, which reached 9.1% in June 2022, bitcoin fell from a previous high near $70,000 down to $15,000.
Likely contributing to this reaction is growing concern in the investment community about inflation’s future with President Trump threatening to levy 25% tariffs on major trading partners like Mexico and Canada and placing a 25% tariff on all steel and aluminum imports worldwide. The Trump administration also implemented tariffs of 10 to 15% on Chinese goods Monday.
Bitcoin and the crypto economy has also had a sluggish start to the year after a blistering 2024 when the asset rose 119.5%. With this morning’s drop it is only up 0.58% in 2025 despite a flurry of activity from the White House, like the appointment of venture capitalist David Sacks as its crypto czar, release of an Executive Order laying out the administration’s plan for crypto, and various proposals to create a strategic bitcoin reserve.
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All Eyes On March
This reading will place added pressure on the rate-setting Federal Reserve’s Open Market Committee (FOMC) during its next meeting, scheduled for March 19th-20th. After raising interest rates by a full percentage point in 2024 on the back of a healthy economy and declining inflation, it held steady during its first meeting in January. According to the CME’s Fedwatch tool, 97.5% of traders are expecting the Fed to keep rates the same for at least this next gathering.
