CPI gently opens up room for rate cuts, and the bearish logic for the US dollar remains valid in 2026

December’s moderate CPI data has become a focal point in recent market discussions. Forex strategist Audrey Freeman recently stated that this data supports the Fed’s policy shift, suggesting that it may still be premature to abandon expectations of a dollar decline by 2026. For the crypto market, the underlying logical chain is worth noting.

How Moderate CPI Reopens Rate Cut Expectations

At a time when market doubts about the Fed’s stance are growing, December’s CPI data is particularly important. According to Freeman’s analysis, this moderate data indicates that the Fed has not completely given up on controlling inflation and still leaves room for further policy adjustments.

The key logic is:

• Moderate CPI = Easing inflation pressures
• Easing inflation = The Fed has room to cut rates
• Rate cut expectations = Pressure on the dollar

This reasoning chain remains valid into 2026. Freeman emphasizes that it is still too early to fully dismiss the possibility of a dovish shift by the Fed, implying that a rate cut cycle is still on the table.

Why the Dollar Still Looks Bearish

The strength or weakness of the dollar primarily depends on interest rate differentials. When the market expects rate cuts, the dollar tends to face depreciation pressure relative to other currencies. Freeman’s view essentially states: although short-term market skepticism about rate cuts exists, CPI data reaffirms the necessity and possibility of rate cuts.

What does this mean?

• Increased probability of Fed rate cuts = Diminished dollar interest rate advantage
• Weakening dollar = Increased attractiveness of other assets
• Including cryptocurrencies and other risk assets may benefit

Potential Impact on the Crypto Market

The dollar’s movement is inversely related to the crypto market. When the dollar faces depreciation pressure, investors often seek other assets to hedge risks, which typically includes Bitcoin and other cryptocurrencies.

From a liquidity perspective, rate cuts by the Fed mean increased market liquidity, which usually boosts risk assets’ performance. Moderate CPI data lays the foundation for this liquidity release.

However, it is important to note that Freeman’s views are based on macroeconomic analysis, and the crypto market will also be influenced by policy, technology, market sentiment, and other factors.

Summary

December’s moderate CPI data supports the Fed’s policy shift and provides new basis for dollar bearish expectations. This logic remains valid into 2026. For the crypto market, a weaker dollar and increased liquidity could signal positive developments, but this needs to be assessed in the context of the specific market environment. The key is to keep a close eye on Fed policy signals and upcoming economic data.