US inflation data sharply drags Bitcoin lower

Risky assets fell following Friday’s inflation report, with bitcoin losing about $762.36 to trade below $23,190.00, within a few dollars of its lowest level of this week. Nasdaq 100 futures were down 1.9%, and S&P 500 futures are lower by 1.4%.

The January PCE Price Index unexpectedly rose to 5.4% on Friday’s release. Bets about the Fed’s next move hiking its fed-funds rate by 50 basis points in March are accelerating after the PCE Price Index showed the disinflation trend reversed in January.

The PCE Price Index for January rose 5.4% from a year ago, compared with a 5.3% increase in December. The January number was far stronger than economist forecasts of a 5.0% increase. The core rate, which excludes food and energy prices, rose 4.7% versus 4.6% in December and higher than the estimated 4.3% growth.

Following the report, odds of a 50 basis point rate hike (as opposed to 25 basis points) at the Fed’s next policy meeting in March are rising, with traders now nearly evenly split between the two choices. As recently as one month ago, there was roughly a 100% expectation of a 25 basis point move in March.

Inflation remains stubborn and sticky between 4%-5%. Service inflation continues to increase with goods disinflation cooling. The risk of a March 50 basis point hike is rising and we are clearing moving toward a 5.5% policy peak at a minimum.

Bitcoin seems to continue to slide on the renewed inflation scare, now threatening to tumble below $23,000.