Bitcoin price drops $1.6K on hot CPI as markets price out Fed rate cut

Bitcoin (BTC) saw snap losses into the Feb. 13 Wall Street open as United States inflation data dealt a blow to risk assets.

BTC/USD 1-hour chart. Source: TradingView

Fed March rate cut “likely gone” after hot CPI

Data from Cointelegraph Markets Pro and TradingView followed a 3.8% BTC price decline on the day, bottoming at $48,435 on Bitstamp.

Bitcoin reacted badly to the January Consumer Price Index (CPI) print, which exceeded expectations.

Month-on-month CPI came in at 0.3%, with the year-on-year figure at 3.1% — 0.1% and 0.3% higher than predicted, respectively.

“The index for shelter continued to rise in January, increasing 0.6 percent and contributing over two thirds of the monthly all items increase. The food index increased 0.4 percent in January, as the food at home index increased 0.4 percent and the food away from home index rose 0.5 percent over the month,” an official press release from the U.S. Bureau of Labor Statistics read.

“In contrast, the energy index fell 0.9 percent over the month due in large part to the decline in the gasoline index.”CPI % change chart. Source: U.S. Bureau of Labor Statistics

Markets immediately began reassessing the likelihood of the Federal Reserve cutting interest rates, shifting their timing from March to later in the year.

The latest data from CME Group’s FedWatch Tool put the odds of a March rate cut at just 8.5% at the time of writing versus 17.5% on Feb. 12.

Fed target rate probabilities. Source: CME Group

“This inflation reading was much hotter than expected all around the board,” trading resource The Kobeissi Letter wrote in part of a reaction on X (formerly Twitter).

“Core CPI was expected to fall and it didn’t while CPI inflation came in 20 bps above expectations. A March rate cut is likely gone.”

Kobeissi added that avoiding the premature rate cut, which would boost risk assets including crypto, was the Fed’s “top priority.”