The U.S. Bureau of Labor Statistics reported on February 13 that January’s Consumer Price Index rose 0.2% on the month and 2.4% year-over-year.
Both figures came in below Wall Street expectations, with headline inflation marking its slowest annual pace since May 2025. Core CPI, which strips out food and energy, fell to 2.5% on an annual basis, the lowest reading since April 2021.
Markets reacted fast. Bitcoin jumped 6% within hours of the release, Treasury yields dipped, and traders began repricing rate cut expectations for mid-2026.
But one soft print doesn’t settle the debate. Konstantins Vasilenko, Co-Founder and CBDO of Paybis, breaks down what this number truly changes for Fed policy, liquidity conditions, and the crypto market.
Konstantins Vasilenko is the Co-Founder and Chief Business Development Officer (CBDO) at Paybis, a global crypto-fiat on-ramp serving 180+ countries. With over a decade leading the crypto industry , he steers Paybis’ licensing strategy across Europe, the UK, and the US, and regularly briefs regulators on crypto user-experience trade-offs. He holds an MSc in International Finance and sits on the European FinTech Association’s digital-assets working group.
- You believe it’s the shift in Fed expectations that matters more than the headline number. What specifically are traders watching in this CPI report that changes rate expectations?
The headline number is a relief trade and nothing more, the kind that fades within a day. What traders actually care about is what the print does to the rate path, and this one wasn’t as clean as people want it to be.
On the surface, it looks good. Headline came in under consensus, and shelter finally showed signs of cooling after two years of being the most stubborn category in the index.
It’s a better headline than it is a report. Tariff-sensitive goods are already pushing core prices higher at a pace we haven’t seen in over two years, food costs haven’t eased in any meaningful way, and airfares jumped sharply. The categories that the Fed actually watches closely aren’t cooperating yet.
The soft headline gave traders a reason to reprice rate cut expectations, and those odds did move higher after the release. But one month of lower energy prices dragging the headline down doesn’t mean the Fed has a green light to ease.
The parts of inflation that matter most to policymakers haven’t budged enough to change their calculus.
- Does this inflation data meaningfully delay rate cuts, or are markets just repricing probabilities at the margin?
This print didn’t delay anything, but it didn’t accelerate much either. The market got excited, and I understand why, but the Fed held steady in January after cutting three times in late 2025, and nothing in this report forces their hand. Core services inflation hasn’t cooled enough, and the January jobs report came in stronger than expected, with unemployment falling to 4.3%.
Wall Street can’t agree on what happens next. Goldman Sachs and Morgan Stanley see two cuts starting in June, Citi wants three, and JPMorgan sees none at all this year.
The other aspect people are overlooking is that the Fed doesn’t use CPI as its primary measure. They watch PCE, and that data comes out later this month. If PCE follows CPI, a June cut becomes more likely. If it goes the other way, the market will have to give back some of what it priced in last week.
- What would the inflation data need to show in the next two releases to force a decisive shift in Fed expectations?
The next CPI release is March 11, exactly one week before the March FOMC meeting. If headline inflation holds at or below 2.3% and core doesn’t bounce back up, it gets very difficult for the Fed to keep justifying the wait. Two consecutive months of cooling followed by a third would be enough to make June feel like a done deal.
The problem is that tariffs are the one variable nobody can price in with any confidence. Core goods already picked up in January, and if that trend continues over the next two months, the whole disinflation story starts to crack. The Fed has made it clear they want to see a sustained move lower, not just a couple of friendly readings.
Goolsbee put it pretty plainly after the release. Services inflation is still high, and tariff-related price increases could complicate things going forward. That’s Fed speak for “we’re not ready to commit.” The trend is pointing in the right direction, but the Fed isn’t going to rush just because the market wants it to.
- If the Fed keeps rates higher for longer, what does that mean for liquidity conditions and risk appetite in crypto over the next two quarters?
It means more of what we’ve already been seeing, and that won’t change until the Fed acts.
Bitcoin has lost nearly half its value since October 2025. Sentiment hit its lowest point on record in early February, worse than during the FTX collapse. ETF outflows have been consistent for weeks, but that’s what happens when rates stay restrictive for this long.
If the Fed keeps rates where they are through the summer, there’s no catalyst for a sustained recovery in crypto.
You need cheaper liquidity for that, and cheaper liquidity requires rate cuts, not just the expectation of them. The January CPI offered some breathing room, but breathing room and actual policy change are two very different things.
- If we do see a pivot toward easing, which parts of the crypto market benefit first, and why?
Bitcoin leads because that’s where institutional money goes first. The ETF infrastructure is already built out, the products exist, and the allocators know how to use them. When rate cut expectations start to firm up, the same capital that pulled out over the last few months flows back in through those same channels.
Ethereum and the larger Layer 1 tokens come next. They always amplify whatever Bitcoin does, in both directions. ETH lost nearly 28% in early February, so the rebound potential is significant once sentiment turns.
DeFi will follow the same path. Lower rates make on-chain yield more attractive relative to traditional fixed income, which brings capital back into lending protocols and restarts the cycle.
- Are you seeing changes in retail vs. institutional positioning following this print?
The gap between retail and institutional positioning is as wide as I’ve seen it. Retail capitulated after Bitcoin dropped from $126,000 to the low $60,000s, and they’ve been net sellers for weeks.
Institutional behavior has been the opposite. Whale wallets accumulated over 70,000 BTC in early February, the largest single-period buying since 2022. They took the other side of every retail panic sell.
January was net negative overall, but the pattern changed from one-way selling to something more mixed, which looks more like repositioning than exit.
