December CPI showdown imminent: statistical correction or inflation rebound, how will the crypto market respond

December US CPI data will be released at 21:30 this Tuesday evening, and this data could serve as a short-term market volatility amplifier. The market generally expects the overall CPI to rebound slightly from 3.0% to 3.1%, but the key question is: is this merely a statistical repair effect, or a sign of structural worsening in inflation? For crypto assets, the answer will determine the recent risk appetite direction.

Data Expectations and Background

Why is there a rebound

The expected December CPI rebound mainly stems from a technical reason: the Bureau of Labor Statistics experienced a disruption in survey work in November due to the government shutdown, raising questions about data reliability. Once normal operations resumed in December, a statistical repair effect occurred, leading to a phased rebound in the data. This rebound does not mean that inflationary pressures have truly worsened.

Key Data Expectations

Maintaining core CPI at 3.0% is crucial, indicating that, excluding volatile food and energy prices, underlying inflation pressures have not worsened.

Market Expectations for Rate Cuts

Interest rate futures show that the market generally expects the Federal Reserve to keep rates unchanged at the January meeting. Regarding the timing of the first rate cut, expectations are dispersed among March, April, and June, with no consensus exceeding 50%, reflecting high uncertainty about the path.

In other words, the market is still waiting for clearer signals. The release of December CPI data is very likely to be that signal change.

Three Scenario Analyses

Most likely scenario: In line with expectations

If the data rebounds as expected, the market will continue to digest this as a statistical repair, with limited impact on risk assets. The crypto market may experience short-term volatility but will not form a trend.

The scenario to be most cautious about: Significantly above expectations

If core CPI shows a notable increase, it will reignite concerns about inflation stickiness. This would reinforce the expectation that the Fed needs to keep rates high, suppressing risk asset performance. In this case, crypto markets could face short-term negative sentiment.

The most favorable but low-probability scenario: Unexpected decline

If CPI unexpectedly drops sharply, combined with November’s unemployment rate rising to a near four-year high, it could signal “stagflation,” strengthening market expectations for Fed rate cuts. This would be bullish for risk assets, including crypto.

Why is this CPI particularly important

The Fed’s policy path remains highly uncertain, and market pricing for rate cuts is dispersed, indicating investors are waiting for clearer signals. The December CPI is a key data point that will help the market reassess inflation trends and monetary policy directions.

For crypto markets, Fed policy expectations directly influence risk asset pricing. The stronger the rate cut expectations, the more liquidity is expected to be loosened, which benefits crypto assets. Conversely, the less dovish the outlook, the more cautious the market.

Summary

December CPI data will act as a short-term market volatility amplifier, requiring close attention to extreme readings that could impact rate expectations and asset prices. Fundamentally, the rebound is mainly due to statistical repair effects, so there’s no need for excessive pessimism. Maintaining core CPI at 3.0% also indicates that underlying inflation pressures are manageable.

The key is to distinguish between a “statistical rebound” and “inflation deterioration” — the former has limited market impact, while the latter is the real risk. Crypto investors should focus on this data release Tuesday evening, but more importantly, understand the underlying implications rather than being driven by short-term fluctuations.