The United States economy is witnessing a significant shift, with inflation data pointing to a clear cooling trend just as the Federal Reserve pivots its monetary policy. These developments are reshaping market expectations and have already sparked a notable reaction in volatile assets, signaling a potential new phase for investment landscapes.
Inflation Cools as Fed Shifts Stance
Recent data from Truflation indicates U.S. year-over-year inflation at 2.45%, a notable decline that positions it below the official CPI reading near 3%. This encouraging trend coincides with the Federal Reserve's crucial decision to officially end Quantitative Tightening (QT) on December 1st, halting the mechanical drain on market liquidity. The cessation of QT, which saw the Fed's balance sheet reduced by approximately $2.43 trillion, fundamentally alters the liquidity backdrop, even without the immediate commencement of Quantitative Easing. This policy pivot is further underscored by the CME FedWatch tool, which now shows a strong 87.2% probability of a 25 basis point rate cut, reflecting widespread market anticipation of softer monetary policy ahead.
Bitcoin's Anticipatory Rally and Future Outlook
In response to these macroeconomic signals, Bitcoin has demonstrated its characteristic agility, staging a significant rally following the end of QT. The cryptocurrency's price surged by roughly 12.6% from its post-QT low, climbing from $83.5k towards the $93k–$94k band. This sharp upside movement positions Bitcoin as a front-runner, with traders pricing in expectations of eased monetary policy and improved liquidity conditions for Q1–Q2 2026. Should the anticipated rate cuts materialize and inflation continue its downward trajectory, Bitcoin could find itself in a favorable pricing environment, aligning with broader market optimism for increased liquidity. Conversely, any delay by the Fed in implementing rate cuts could lead to deeper consolidation, underscoring the macro hesitation still influencing its trading range.
