Bitcoin saw a brief spike on Friday after new U.S. inflation data came in lower than expected, but the rally faded just as quickly as it began.
The surge followed the release of the September 2025 Consumer Price Index (CPI) report, which showed price growth easing slightly and strengthened expectations that the Federal Reserve will cut interest rates soon.
Specifically, the Bureau of Labor Statistics reported that annual inflation rose to 3.0% in September, just under economists’ forecasts of 3.1% and a bit higher than August’s 2.9%.
US Inflation Data Comes in Cooler than Expected
On a monthly basis, inflation increased by 0.3%, matching expectations and slowing from August’s 0.4%. The report arrived during the ongoing federal government shutdown that started on Oct. 1, making it one of the few official data updates released this month.
Notably, the figures showed pressures but pointed to a cooling trend overall. The 0.3% monthly increase in headline CPI came mostly from a 4.1% jump in gasoline prices, which lifted the broader energy index by 1.8%. Food inflation eased, climbing only 0.2% after the sharp 0.6% increase in August.
Meanwhile, core CPI, which leaves out food and energy, rose by just 0.2% in September and 3.0% year over year. This slowdown shows weaker price growth in services outside housing, which rose 0.2%, and a 0.4% drop in used car prices.
Economists said the results strengthen the case for the Fed to start cutting rates. Specifically, ING’s chief international economist said the softer data shows how consumers and businesses are adjusting to tariffs by shifting imports, keeping inflation in check.
EY-Parthenon’s chief economist noted that while tariffs have pushed up prices in some areas, the latest numbers show those effects remain limited. This gives the Fed more flexibility to ease policy.
The Stock and Bitcoin Markets React
As expected, the markets reacted immediately. For one, stock futures climbed, with the S&P 500 up about 0.7% before the opening bell, while the U.S. dollar slipped as traders raised bets on a more dovish Fed.
Data from CME FedWatch showed the odds of a 25-basis-point rate cut next week nearing 99%. Also, analysts at JPMorgan said a larger 50-point cut could follow if the next data release shows more weakness. Even so, inflation holding near 3% continues to challenge the Fed’s goal of bringing it down to 2%.
Notably, Bitcoin’s reaction was quick. Within five minutes of the CPI announcement, the coin shot up from $111,013 to $112,066, marking its highest level in more than a week. This spike added over $20 billion in market value.
However, the rally quickly reversed, as heavy resistance around $112,000 triggered a 1.4% drop to $110,488. Bitcoin has since struggled to reclaim the $111,000 zone it traded near before the report.
Nonetheless, despite the ongoing fluctuations, the softer inflation data supports Bitcoin’s near-term bullish outlook. Lower inflation and rising expectations of Fed rate cuts keep risk appetite alive, which tends to favor crypto markets.
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