A softer U.S. inflation reading is bolstering expectations of further Federal Reserve rate cuts and giving risk assets, including Bitcoin, a short-term tailwind, according to analysts. The September Consumer Price Index (CPI) print came in slightly below forecasts, signalling that disinflation remains intact and strengthening the Fed’s case to maintain a gradual easing path.
Speaking with Yellow.com, Bitfinex analysts stated that the numbers "signal continued disinflation despite persistent shelter and services prices." They noted that Treasury yields eased and the dollar slipped as markets priced in a higher probability of another rate cut before year-end.
"For Bitcoin and broader digital assets, the print validates the recent consolidation as part of an ongoing correction phase rather than a top," the analysts added, suggesting ETF inflows could pick up if yields continue to soften.
Market Momentum and Investor Sentiment
David Siemer, CEO of Wave Digital Assets, observed that inflation that is "elevated but not accelerating" provides crypto markets with "some positive momentum after a period of volatility." He pointed out that a weaker dollar and a dovish Fed outlook tend to boost digital assets like Bitcoin and Ethereum, even if traders remain cautious.
"The market isn’t in full-throttle rally mode yet," Siemer commented. "Traders are taking incremental exposure, not betting on a straight run. If we see clear signs of rate cuts and sustained inflows, we could look at a meaningful move upward heading into year-end."
Kyle Chassé, founder of MV Global, shared a similar perspective, referring to the softer CPI as a relief for risk assets.
"In a lower-rate world, the carrying cost of Bitcoin drops, while ETFs keep acting as the steady bid pulling coins off the market," he explained.
Caveats and Future Outlook
Despite the positive sentiment, Chassé cautioned that "core prices running hot, import costs creeping higher, and a firm dollar can still bite." He added that the Fed will likely need "a few more soft prints and cooler jobs data before declaring victory."
The Bureau of Labor Statistics reported headline inflation at 2.7% year-on-year, which was below the 2.8% estimate, while core inflation rose 2.9% versus the 3.0% expected.
Both measures increased by 0.2% month-on-month, marking the slowest pace in three months. Shelter costs, in particular, showed the smallest rise since early 2021. This data, which was delayed due to the government shutdown, has reinforced investor expectations that the Fed could follow next week’s widely anticipated cut with another in December.
With Treasury yields slipping and the dollar easing, analysts suggest the current environment favors both equities and digital assets, especially if disinflation persists through the next round of economic data.