Latest Research Projects US Inflation Surge, Threatening Disinflation Optimism in the Crypto Market

In the latest economic analysis disrupting market expectations, experts predict that inflationary pressures in the United States will increase significantly this year, directly eroding the disinflation scenario that has been the hope of many crypto investors. This finding indicates that the disinflation desired by the digital community may actually become a difficult dream to realize in a changing policy landscape.

Adam Posen, President of the Peterson Institute for International Economics, and Peter R. Orszag, CEO of Lazard, have released a study showing that consumer inflation could surge beyond 4% throughout this year—far above the more optimistic market consensus projections of sustained disinflation. Recent data shows Bitcoin [BTC] is currently trading at $88.31K, down 0.69% in the last 24 hours, reflecting growing market anxiety over monetary policy uncertainty.

Inflation Surges, Disinflation Shaken: What the Market Is Really Facing

This disappointing projection serves as a harsh reminder to BTC bulls confident in a permanent disinflation scenario. The research by Posen and Orszag identifies several structural factors that will counteract the positive effects of AI productivity gains and falling housing costs—two main pillars of previous disinflation hopes.

The current conditions sharply contrast with the momentum of 2025, when official inflation rates fell to 2.7%, the lowest since 2020. However, researchers warn that these relatively low figures will not be sustainable under the pressure of upcoming new policies. If their projections are correct, market expectations of strong disinflation will prove premature.

Trump Tariffs and Tight Labor Markets: Two Major Drivers of Inflationary Pressure

The first mechanism that will undermine disinflation is the Trump-era tariff policies. According to the Posen-Orszag analysis, importers will pass on tariff cost increases to end consumers, albeit with a delay. This effect will accumulate through mid-2026, adding about 50 basis points to core inflation at that time.

The second mechanism is labor market tension. The projected deportation of large-scale migrants will create labor shortages in sectors reliant on foreign workers, pushing wages higher and triggering demand-driven inflation. This combination fundamentally contradicts the disinflation narrative that has long been the backbone of positive crypto market expectations.

A third often-overlooked factor is the government’s fiscal stance. The US fiscal deficit is projected to breach 7% of GDP, aligned with looser liquidity conditions, creating a macroeconomic environment that is structurally inflationary—completely opposite to the disinflation expected.

As summarized by Bitunix analysts, “The real policy risk is not tightening too early, but remaining too cautious after structural disinflation begins to take hold, ultimately forcing more drastic and disruptive policy adjustments.”

Implications for the Federal Reserve: Why Rate Cuts Will Halt

If inflation truly surges above 4%, the Federal Reserve will face a dilemma. Many investment banks forecast the Fed will cut interest rates by 50-75 basis points this year, while the crypto community anticipates much more aggressive cuts. However, higher inflation projections will make the Fed reluctant to take such bold steps.

Global government bond yields are already reacting. The 10-year Treasury hit a five-month high of 4.31% earlier this week, following the rally in Japanese bond yields to record highs. This rise in yields directly makes risky investments like stocks and crypto less attractive to investors.

This scenario illustrates how disinflation—once the main bullish reason for digital assets—is now at risk of turning into persistent inflation. The hope for sustained disinflation may need to be revised by the market.

Additional Pressure from Energy Prices

As an often-overlooked factor, WTI and Brent oil prices have surged about 12% this month. This energy price increase will add inflationary pressure at the consumer level, as energy is a fundamental input for nearly all economic sectors. This further strengthens the scenario contrary to the crypto market’s disinflation expectations.

Conclusion: Markets Must Adjust Expectations

Recent research from the Peterson Institute and Lazard offers a perspective that shifts market calculations. While the crypto community has long hoped that disinflation would prompt the Federal Reserve to cut interest rates aggressively, the emerging economic reality suggests otherwise: inflation will rise, disinflation will halt, and rate cuts will be delayed.

Bitcoin and other risk assets are under pressure, with BTC down nearly 4% this week and now at $88.31K. If the disinflation projection underlying the bullish crypto strategy proves incorrect, the market may need to undergo a significant repricing. Investors should prepare for a more hawkish monetary outlook than previously anticipated.