The weakness of American consumers should normally have reinforced expectations of rate cuts and supported bitcoin. But the simultaneous rise in inflation expectations creates a more unfavorable scenario: a fragile economy without rapid monetary easing.
In brief
- US consumer confidence remains weak, while their inflation expectations continue to rise.
- Households expect inflation of 4.7% over one year, complicating the Fed’s prospects of lowering rates.
- The economic slowdown no longer guarantees monetary easing favorable to Bitcoin.
- The prolonged maintenance of high rates could increase pressure on Bitcoin, close to $80,000.
- The next publication of the PCE index will be decisive in assessing inflation risks and the outlook for the crypto market.
Household weakness no longer guarantees a rate cut
The University of Michigan’s consumer confidence index stood at 48 points in October, up from 48.1 in September. This monthly stability masks a still very degraded level, 10.4% lower than that of October 2025 and 15% lower than that of February.
Current economic conditions have mainly fallen by 8.3% in one month, from 50.9 to 46.7 points. Households therefore consider their immediate situation more difficult, particularly when they are considering expensive purchases. Conditions for purchasing durable goods fell by 18%, driven by prices and borrowing rates.
Several indicators describe this risk of slowdown accompanied by persistent inflation:
- Overall confidence remains near historic lows;
- Current economic conditions are declining sharply;
- Purchasing conditions for durable goods fall by 18%;
- Expected one-year inflation reaches 4.7%;
- Long-term expectations increase to 3.5%;
- Both inflation measures increased for the second consecutive month.
Joanne Hsu, director of the investigation, declared :
Purchasing power continues to dominate consumers’ perceptions of the economy.
Households are simultaneously experiencing high prices and more expensive credit, while their prospects remain fragile.
This configuration calls into question a mechanism usually favorable to bitcoin. Economic deterioration often leads to expectations of falling rates, which reduce bond yields and free up more liquidity for risky assets. But this mechanism works poorly when inflation remains high.
Price expectations complicate the Fed’s calculation
American consumers expect inflation of 4.7% over the next twelve months, compared to 4.6% in September and 3.4% in February. Over the long term, their expectations increased from 3.4% to 3.5%, a level higher than the range of 2.8% to 3.2% observed in 2024.
These figures do not correspond to a measure of inflation actually observed. They reflect the perception of households, according to on-chain data. The distinction is important, but the Federal Reserve monitors these surveys because behaviors can end up turning predictions into reality.
Consumers convinced that prices will increase may bring forward certain purchases. Employees can demand higher pay and companies can adjust their rates. This succession of decisions risks maintaining inflation even after the initial shock has disappeared.
The landmark study released October 23 by the University of Michigan watch that long-term expectations and their degree of uncertainty exceed the comparable levels of 2019 and 2024. Joanne Hsu believes, however, that lasting entrenchment remains avoidable and that the impact of advance purchases has not yet been measured.
The Fed thus finds itself faced with two opposing signals. Weak morale and major purchases call for caution so as not to further slow down the economy. On the contrary, high price expectations encourage it to maintain a restrictive policy.
Bitcoin loses support from ‘bad news’ scenario
For bitcoin, the main risk is not just a further rise in rates. It lies in their maintaining a high level for a longer period, even as economic activity slows down.
In a classic cycle, a disappointing economic statistic can become good news for the markets. Investors then anticipate a more flexible monetary policy, a fall in bond yields and an improvement in financing conditions. This scenario has often supported tech stocks and cryptos.
A situation close to stagflation reverses this logic. The Fed can’t cut rates quickly because inflation remains too high, but it also can’t raise rates aggressively without deepening the slowdown. The markets then remain deprived of visibility and new liquidity.
Bitcoin, close to $80,000, is already evolving in an environment marked by irregular outflows from ETFs and high sensitivity to American yields. A study by the International Monetary Fund published in 2023 also concluded that monetary tightening reduced the demand for cryptocurrencies in a manner comparable to its effect on stocks.
The next test will be the publication of the PCE index on October 29, the day after the Fed’s decision. A slowdown in prices would restore the possibility of future easing. A new inflationary surprise would, on the contrary, reinforce the most difficult scenario for bitcoin: a less dynamic economy, but sustainably high rates.
Maximize your Tremplin.io experience with our ‘Read to Earn’ program! For every article you read, earn points and access exclusive rewards. Sign up now and start earning benefits.
