Consumer Price Index Under Pressure: Economists Warn Of Resurgence Inflation Threatening Bitcoin Scenario

Optimism among crypto investors may be put to a severe test this year. Two leading economic think tanks warn that the consumer price index—a crucial measure of the cost of living—is rising faster than markets expect this year, possibly above 4%. This could have far-reaching consequences for the Federal Reserve’s interest rate policy and therefore for the expectations of Bitcoin investors who are counting on aggressive interest rate cuts.

According to a recent study by Adam Posen (president of the Peterson Institute for International Economics) and Peter R. Orszag (CEO of Lazard), the increase in consumer prices this year could reach a much higher level than the current consensus foresees. This is in stark contrast to the developments last year, when the consumer price index fell to 2.7%—the lowest level since 2020.

Why Consumer Prices Are Under Upward Pressure

The two economists point to several structural factors that could push the consumer price index higher. The primary risk lies in the Trump-era import tariffs, which require importers to gradually pass on their costs to end consumers. While this pass-through is delayed, it is expected to add more than 50 basis points of pressure to core inflation by mid-2026.

In addition, a tightening labor market plays a role. Potential migration restrictions could create labor shortages in migrant-dependent sectors, driving up wages and fueling the consumer price index through demand-driven channels. Finally, Posen and Orszag point to persistent fiscal deficits (possibly above 7% of GDP) and more accommodative financial conditions as catalysts.

“These factors outweigh the downward trends that consensus has focused on—namely, the continued decline in housing inflation components and productivity gains from artificial intelligence,” they state in their report. This indicates a fundamental difference of opinion: while some rely on technological efficiencies, Posen and Orszag stress that macroeconomic forces can outweigh these benefits.

The implications for interest rate policy and market adjustments

A sustained rise in the consumer price index could force the Federal Reserve to be more cautious about rate cuts. This poses a direct threat to crypto markets, where investors are massively counting on lower borrowing costs. While investment banks are cautiously predicting 50-75 basis points of interest rate cuts this year, crypto enthusiasts expect a much more aggressive policy.

Analysts at cryptocurrency exchange Bitunix summarize the central risks as follows: “The real policy risk is not easing too early, but rather remaining cautious after structural disinflation has set in—ultimately making an abrupt and disruptive adjustment process inevitable.” This analysis explains why markets are now pricing in a ‘policy catch-up scenario’: the expectation that the Fed will have to lag behind.

Crypto and bond markets are already feeling the pressure

The warning of higher consumer price rises comes at a time when global bond yields are already rising. The US 10-year Treasury yield hit more than 4.3% at the end of January—the highest level in months—driving investors away from risk assets. Bitcoin is down nearly 6% to $84.61K this month, while the broader CoinDesk 20 index is also under pressure.

Rising interest rates are making traditional fixed income more attractive, while crypto’s shine is fading. Crypto derivatives markets relay this sentiment: open interest is falling, volatility remains contained, and investors favor protective put options and short positions over bullish bets. This points to fears of further corrections if the consumer price index really does exceed 4%.

The outlook for 2026

The core conflict is clear: the bullish narrative of crypto investors—that curative inflation, AI productivity gains, and aggressive Fed decisions would lead to a bull market—is under pressure from more pessimistic macroeconomic analysis. If Posen and Orszag are right and the consumer price index does indeed fall higher, it would not only cool down the crypto rally but also affect traditional stock markets.

For followers of the consumer price index, 2026 will be crucial. The coming months will show whether structural inflation risks are really as prominent as these economists claim, or whether the optimistic scenarios of artificial intelligence and supply efficiencies say after all. Until then, investors will feel tension between two opposing narratives about the future of interest rates and crypto values.