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The CPI measures the change in the prices of goods and services in the US economy, making it the main indicator of inflation. When it is higher than expected, investors usually anticipate a more restrictive monetary policy by the Federal Reserve (Fed), the central bank.
In other words, high inflation can imply that interest rates remain high, which usually discourages investment in assets considered risky, such as stocks and bitcoin.
On the contrary, if the CPI is lower than expected, it could fuel expectations of lower interest rates, which has historically been favorable for risk markets. Why? Because it implies greater liquidity, as well as lower returns on fixed-income assets, which increases the attractiveness of variable-income assets such as bitcoin.
According to the expectations surveyed, the expected annual CPI in the United States will remain at 2.9%, the same figure recorded last month. Therefore, bitcoin and stock prices could react downwards, expecting interest rates to remain high with such an inflationary outlook.
various analysts believe that Trump will pressure Powell to lower rates and favor the markets. Therefore, if the head of the Fed provides this guidance in his expected testimony, it could validate a rise for US stocks and bitcoin.
Otherwise, if Powell maintains an aggressive monetary vision, these markets could react with a temporary fall and continue in the consolidation range that they lead to until the concretion of strong factors that remove them from this trend.