Bitcoin back below $50k while stocks struggle on poor inflation print

Stocks slipped while cryptocurrencies were mixed Tuesday morning after the latest consumer price data showed inflation is more persistent than economists had bargained for.

January’s consumer price index, which broadly measures goods and services across the country, rose 0.3% from December. Prices are up 3.1% year-over-year, according to data from the US Bureau of Labor Statistics. Analysts had called for a 0.2% gain over the month and a 2.9% annual increase.

The S&P 500 and Nasdaq Composite indexes had a rocky start Tuesday morning shortly after the open, losing 1.4% and 1.7%, respectively.

Bitcoin (BTC) lost around 0.4% Tuesday morning in New York after briefly breaking through $50,000. Ether (ETH) on the other hand was up around 4% at time of publication. Analysts say bitcoin’s surge past a key psychological level could be a sign recent headwinds are beginning to let up.

“The post-ETF sell-off in bitcoin didn’t last very long and a break above $50,000 will be widely viewed as a significant milestone in its comeback,” Craig Erlam, senior market analyst at OANDA, said. “Many will now be hoping it goes from strength to strength, perhaps buoyed by the halving event in April.”

The latest inflation print could spell trouble for investors banking on an interest rate cut from the Federal Reserve in the coming months. Fed Funds futures put the likelihood of a March rate decrease at just 9%, and odds of a cut coming in May currently sit at 37%, according to data from CME Group.

The Federal Reserve Bank of New York on Monday kept its predictions for one year and five year inflation the same, according to its January Survey of Consumer Expectations (SCE). Central bankers say one-year prices will remain elevated more than desired, at around 3%.

“Fed Chair Powell often refers to survey-based readings of expected future inflation, and the SCE is one of the most closely watched reports tracking these expectations,” Nicholas Colas, co-founder of DataTrek Research, said.

“Medium-term inflation expectations are back to pre-pandemic levels (2.5%), but 1-year expectations are not (3%). This is one more reason the Fed needs to see more evidence of lower inflation before cutting rates; it wants consumers to be confident that price increases are waning,” Colas added.

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