CPI data is about to be released again: Why will January's data impact your crypto assets?

Tonight (February 13) at 9:30 PM, the U.S. Bureau of Labor Statistics will release the highly anticipated January Consumer Price Index (CPI) report. For crypto market traders, this is not just a routine release of macroeconomic data but could also serve as a significant catalyst influencing short-term market volatility.

According to a Reuters survey, economists expect the median forecast to show a month-over-month increase of 0.3% in the U.S. January CPI, similar to December’s growth, with expectations ranging from 0.1% to 0.4%. Year-over-year, the CPI is projected to rise by 2.5%, down from 2.7% in December.

However, what’s truly worth noting is a historical pattern hidden behind the data: CPI figures in January tend to exceed expectations every year. This phenomenon is known as the “January Effect,” and even though the Bureau of Labor Statistics will update its calculation models in this report, it may not fully resolve this issue.

The “January Effect”: Why Does Early-Year Inflation Always Seem to “Surprise”?

The so-called “January Effect” refers to the recent pattern where CPI data released each January almost always surpasses market expectations. This is not coincidental but rooted in deep economic behavioral logic. Morgan Stanley economist Diego Anzoategui points out: “Companies tend to raise prices at the beginning of the year after the holiday season ends. Seasonal factors do not fully eliminate this pattern, so seasonally adjusted inflation data often remains higher than at other times of the year.”

Multiple factors contribute to this phenomenon. First, at the start of the new year, many companies routinely adjust prices, covering sectors from healthcare and insurance to clothing and various daily goods. Second, certain service prices, such as airline tickets and hotel stays, also tend to rise seasonally at this time. Economists expect categories like prescription drugs and auto insurance to reflect this early-year price increase effect prominently.

Mike Reid, head of U.S. economics at Royal Bank of Canada (RBC), emphasizes in a report: “Since 2021, January has typically shown higher inflation due to early-year price hikes by companies and lagging seasonal factors.” He forecasts that core CPI this month could increase by 0.4% month-over-month, higher than the market consensus of 0.3%.

Seasonal Adjustment: An Annual “Major Overhaul” of Statistical Models

A noteworthy technical aspect of this report is that the U.S. Bureau of Labor Statistics will release a recalculated seasonal adjustment factor to reflect price changes in 2025. This means the seasonally adjusted CPI indices for the past five years may be revised.

According to the BLS, each January, the seasonal adjustment factor is recalculated to account for price changes over the just-concluded calendar year. This routine annual recalibration could lead to revisions of the seasonal adjustment indices for the past five years.

However, economists generally believe that updating these models may not fully eliminate the “January Effect.” Omair Sharif, founder of Inflation Insights, warns investors that due to the BLS’s recalibration of seasonal factors, January data may become more difficult to interpret than usual, and no unexpected results should be dismissed lightly. He notes that in January 2024 and 2025, core inflation surged, initially attributed to “residual seasonality,” but the real cause was extraordinary price increases.

Potential Impact on the Crypto Market

Against the backdrop of ongoing macro tightening policies affecting risk assets, inflation data and the crypto market are becoming increasingly correlated. As of this writing, data from the Gate platform shows Bitcoin (BTC) hovering around $67,000, while Ethereum (ETH) fluctuates between $1,900 and $2,000. Market consensus suggests tonight’s CPI data could trigger another wave of volatility.

Analysts indicate that if CPI exceeds expectations as per historical patterns, it could reinforce market expectations that the Federal Reserve will keep interest rates high for longer, which generally pressures risk assets. Conversely, if the data unexpectedly comes in lower, it could boost market sentiment. Currently, CME’s FedWatch tool shows that markets widely expect the Fed to hold rates steady at least until July.

Tom Lee, research head at Fundstrat Global Advisors, remains relatively optimistic. He believes that even if inflation drops to 2.5%, it aligns with the pre-pandemic average of 2017–2019, representing a “normal” inflation environment. Considering the current federal funds rate target range of 3.5%–3.75%, well above pre-pandemic levels, the Fed still has room to cut rates.

Summary

Whether tonight’s CPI data once again confirms the “January Effect” or not, crypto traders should prepare for potential volatility. Historical experience shows that early-year inflation data often exhibits unique seasonal characteristics, and updates to statistical models may complicate data interpretation.

Continuing to monitor market developments on the Gate platform, maintaining rational analysis, and managing risks effectively are likely key to steady trading in the current macro environment. After all, in the 24/7 world of crypto trading, rapid information interpretation and effective risk management are always at the core of success.