December CPI and real earnings data will be released today at 8:30 a.m. ET. Bitcoin Powell is holding $92,000 after recent clashes between the Fed and the Justice Department, in which he made a rare appearance to the press and criticized President Donald Trump.
The overall CPI is expected to be 0.3% month-on-month and 2.7% year-on-year (unchanged from November), while the core CPI is expected to be 0.3% month-on-month and 2.7% year-on-year (up from 2.6%).
An upside surprise would justify current Chairman Powell’s vigilance against persistent inflation. And it cements the “longer high” narrative that sent Bitcoin down from $101,000 to $92,000 after the Fed’s decision last week.
Real earnings data will show whether inflation-adjusted wage growth continues to support consumer spending, with November data showing an annualized 0.8% growth, which suggests workers are not keeping up with rising prices.
Analysts warn that data distortions from the government shutdown continue to impact the December report, and that disruptions related to the government shutdown are causing November product and rental price benchmarks to be artificially low. Citing these technical factors, Oxford Economics expects headline CPI to be 0.4% monthly, above consensus.
The timing is critical as markets are also digesting ongoing geopolitical risks and trade policy uncertainty, which could increase inflation pressures through 2026.
With odds of the Fed cutting rates on January 28-29 near zero, and the outlook for inflation in March becoming increasingly uncertain, today’s weaker-than-expected inflation trend could be a source of comfort, or an acceleration could strengthen hawkish positions.
Bitcoin’s technical setup remains under pressure, with key support between $88,000 and $90,000 and resistance at $98,000. With a market capitalization of $3.23 trillion in cryptocurrencies, traders are waiting for clarity on whether the Fed made a policy mistake by suggesting fewer interest rate cuts, or whether it correctly judged that inflation remained strong and too harsh for aggressive easing.
A strong CPI above 2.7% year-over-year is likely to pressure Bitcoin towards $88,000, while an unexpected decline below 2.5% could trigger a bailout rally towards $98,000-100,000. Real earnings data is important because continued negative growth in real wages has historically preceded weak consumer spending and economic recession, making us bullish on interest rate cuts but bearish on economic growth.
The market is trading in an essentially impossible balance. In other words, they hope for inflation to cool enough to justify rate cuts, while still hoping for growth to be strong enough to avoid a recession.
CPI and real profits: the final test of the Fed’s hawkish stance – how will the crypto market react?
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