Market News: Alternative Inflation Data Signals Sharp Cooling in U.S. Prices, Raising Fed Cut Expectations

Alternative inflation metrics are pointing to a rapid cooling in U.S. price pressures, potentially reshaping expectations for Federal Reserve policy and influencing risk assets such as cryptocurrencies.Real-time data from Truflation shows U.S. inflation falling well below official government readings, even as the Federal Reserve remains cautious on interest rate cuts.As of Sunday, Truflation’s U.S. Consumer Price Index (CPI) registered 0.86% year over year, down sharply from 1.24% a day earlier. Its proxy for core personal consumption expenditures (PCE)—the Fed’s preferred inflation gauge—stood at 1.38%, comfortably below the central bank’s 2% target.By contrast, official data shows U.S. CPI at 2.7% for December and core PCE at 2.8% in November, highlighting a growing divergence between real-time and lagging inflation measures.Truflation aggregates millions of daily price points across housing, food, energy, insurance, and services, offering a faster-moving view of inflation dynamics than traditional monthly releases.Fed policy uncertainty and market impactThe data arrives shortly after the Federal Reserve paused rate cuts and signaled uncertainty around near-term easing. Some market participants now argue policymakers may be reacting too slowly to rapidly improving inflation conditions.Interest rate expectations are closely tied to U.S. dollar liquidity and global risk appetite. Historically, falling inflation and rate cuts have weakened the dollar and supported risk assets, including Bitcoin and broader crypto markets.U.S. dollar at a potential inflection pointTechnical signals suggest the U.S. dollar may already be under pressure. The U.S. Dollar Index recently closed below a long-term support level that had held for more than a decade, according to market data—raising the risk of a sustained downtrend if confirmed.Macro investors, including Real Vision founder Raoul Pal, have previously argued that a weaker dollar is structurally beneficial, easing global dollar-denominated debt burdens and supporting liquidity-driven assets.If alternative inflation data continues to diverge from official readings, pressure may build on the Federal Reserve to reassess its policy stance—an outcome that could prove increasingly supportive for crypto and other risk-sensitive markets.