Economists warn of upcoming inflation in the US, threatening the crypto market's hopes for rate cuts

A new analytical report by leading economists turns market expectations upside down. Instead of the anticipated continuation of the deflationary trend, experts from the Peterson Institute and Lazard consulting firm predict that inflation in the US could exceed the critical 4% mark this year. This warning delivers a serious blow to the optimism of investors in Bitcoin and other risk assets, who based their calculations on the assumption of a soft monetary policy.

The analysis conducted by Adam Posen, president of the Peterson Institute for International Economics, and senior Lazard executive Peter R. Orzag, identified a complex set of economic factors capable of counteracting the natural decline in prices. According to their estimates, the combined impact of these factors significantly outweighs the deflationary tendencies previously relied upon by optimistic forecasts.

The current inflation rate in the US, measured by the Consumer Price Index, stands at 2.7% — the lowest since 2020. However, economists believe that this relatively favorable situation could quickly change.

What factors are pushing consumer prices upward

There are several specific reasons why inflation in the US could accelerate in the coming months. First, the introduction of import tariffs creates a chain of long-term effects. Although importers initially absorb the additional costs caused by tariffs, over time these costs inevitably pass on to end consumers.

“By mid-2026, the period of delayed cost transfer should end. This will add approximately 50 basis points to the overall inflation level,” Posen and Orzag note. The delay in passing on costs allows smoothing short-term price spikes but creates a more structural and sustainable increase in consumer prices in the medium term.

The second significant factor is tension in the labor market. Possible tightening of migration policies and deportations could provoke a labor shortage in industries traditionally dependent on foreign workers. As a result, companies will be forced to raise wages, which in turn stimulates demand-driven inflation and pushes prices even higher.

The third point concerns government finances. Government spending threatens to increase the US fiscal deficit above 7% of GDP. In an environment of already eased financial conditions and unstable consumer inflation expectations, such a budget deficit acts as an accelerator for rising prices.

Additionally, economists point to the role of productivity and technological innovations. While AI and other technologies theoretically should reduce production costs, and the housing sector indeed shows signs of deflation, these deflationary factors are insufficient to outweigh inflationary pressures.

The central bank will face a difficult situation

If the forecasts come true, the Federal Reserve will face a sharply more complicated choice. With higher inflation, the Fed will not be able to reduce borrowing costs as quickly and intensely as financial markets and crypto enthusiasts expect. Investment banks forecast rate cuts of 50-75 basis points this year, while digital asset advocates hoped for an even more aggressive easing policy.

Crypto exchange analysts Bitunix summarized the essence of the dilemma: “The real risk is not excessive easing, but excessive caution, which could lead to a sharper and more destabilizing correction in the future.” This assessment reflects market concerns that if inflation truly returns, the Fed will have to make a sharp turn toward tightening the money supply.

Asset volatility increases amid rising bond yields

The market is already reacting to changing expectations regarding inflation in the US. Yields on global government bonds are rising, including a rapid increase in US Treasury yields. The 10-year bonds reached a five-month high of 4.31% earlier this week, reflecting investors’ reassessment of long-term inflation risks.

Meanwhile, Bitcoin is under pressure and trading at $88.28K with a slight decrease of 0.83% over the past 24 hours. Higher bond yields are shifting capital from speculative assets (stocks, cryptocurrencies) into more conservative fixed-income instruments, creating an unfavorable environment for digital assets.

This scenario does not align with the narrative that dominated at the end of last year, when Bitcoin bulls built their positions precisely on expectations of deflationary trends and a soft monetary policy. If inflation in the US indeed returns to the levels indicated, it will completely revise this outlook.

The tech sector continues to increase investments

Interestingly, large tech companies show a different picture. Quarterly reports from Microsoft and Meta reveal no slowdown in investments related to artificial intelligence. Microsoft emphasizes that AI has become one of the company’s key areas with long-term growth prospects. Meta, in turn, forecasts significant capital expenditure growth in 2026 to expand its research divisions and core business.

This means that even if inflation returns in the coming months, major players in the tech sector remain focused on aggressive expansion. However, the question remains open: will these investments truly generate enough productivity gains to counteract inflationary pressures in the US economy?