How Bitcoin Investors Should Read US CPI and FOMC Announcements

Sometimes you see news that inflation has slowed, yet the price of Bitcoin falls. On other days the Fed holds rates steady, yet the market turns nervous. The announcement looks like good news, so why does the price move the other way?

The market also looks at how far the announced result differs from what was expected. It is easier to understand if you compare CPI's forecast and actual figure for the same item, and read FOMC by separating this meeting's rate decision from the outlook for future rates. That said, this gap alone does not decide which way coin prices will go.

How to Find CPI and FOMC Release Schedules

Release dates for the US Consumer Price Index (CPI) are listed in the schedule of the US Bureau of Labor Statistics (BLS). The key is to tell the reference month apart from the release date. "August CPI" does not mean it is released in August; it means it is the result of measuring prices in August.^{1Source 1US Bureau of Labor Statistics, Schedule of Releases for the Consumer Price Index}

The schedule of the Federal Open Market Committee (FOMC) can be found in the meeting calendar of the Federal Reserve System (the Fed), the central banking system of the United States. Each meeting links to its Statement, Press Conference, and Minutes, and meetings that also release economic projections are marked with an asterisk. The meeting date when rates are decided and the date when the minutes are released are separate dates.^{2Source 2Federal Reserve, Meeting calendars and information}

How to Compare the CPI Forecast with the Actual Figure

The previous figure and the forecast shown on a CPI release screen play different roles. The previous figure is the last result, while the forecast shows how the market expected this result to turn out in advance. Even if inflation came in lower than last month, if it did not fall as much as expected, "the rise has slowed" and "it is higher than expected" can both be true at the same time.

When reading a release, the first comparison should be the forecast and the actual figure for the same item. A month-over-month forecast should be matched with the month-over-month result, and a headline CPI forecast with the headline CPI result. If you compare different items, you will misjudge even the basic question of whether it came in above expectations.

If inflation comes in higher than expected, the market may consider the possibility that the Fed will keep rates high for longer. But that does not create a formula like "high CPI means coins fall." Depending on what rate path was expected before the release, the same result can be received differently.

Headline vs. Core CPI, and Differences in Comparison Periods

Headline CPI is the overall index including food and energy, while Core CPI is the index excluding food and energy. Month-over-month compares with the previous month, and year-over-year compares with the same month last year. In the BLS's main CPI release, month-over-month figures are seasonally adjusted and year-over-year figures are not seasonally adjusted, so you need to match the comparison period and adjustment status when reading them.^{3Source 3US Bureau of Labor Statistics, Consumer Price Index News Release: August 2022}

When headline CPI slows, checking whether core CPI slowed too tells you whether prices excluding food and energy moved in the same direction. If you read the big trend with year-over-year and look at the most recent month's change with month-over-month, the roles of the two figures become clear. Looking at the detailed items after that helps you understand more specifically why the overall figure moved.

Saying the inflation rate has fallen is also different from saying prices have gone down. If the rate of increase has slowed, prices may still be rising, just more slowly. That is why a news headline saying "inflation slows" should not be read straight away as falling prices.

You also should not compare CPI directly with the Fed's inflation target. The Fed's longer-run inflation goal is based on the annual rate of change in the Personal Consumption Expenditures Price Index (PCE Price Index). The fact that CPI has slowed alone is not enough to judge that the conditions for a rate cut have been met.^{4Source 4Federal Reserve, Why does the Federal Reserve aim for inflation of 2 percent over the longer run?}

FOMC Statement, Minutes, and Dot Plot: What's the Difference

The FOMC statement is the document that tells you what was decided at this meeting. The minutes contain more detail on the discussions that led to that decision, and for regularly scheduled meetings they are released three weeks after the policy decision date. The release of the minutes is not a new rate decision but a chance to read the discussions from the previous meeting.^{2Source 2Federal Reserve, Meeting calendars and information}

The Dot Plot is a chart that shows, as dots, the future rate level each meeting participant considers appropriate. It is included in the Summary of Economic Projections (SEP) and is not a rate path agreed on by the committee. Even if the dots move lower, you cannot read that as a promise to cut rates on that schedule.

On FOMC announcement day, read this meeting's decision in the statement, and if it is a meeting that releases economic projections, follow up with the outlook. The press conference helps you understand the reasons for the decision and the conditions attached to the outlook. Whether rates were held this time and how rates will move going forward are separate questions.

Timeline of 2022 CPI and FOMC Release Dates

Even when the reference month or the month of the meeting is the same, the date the data is released can differ. In the timeline below, past price forecasts have been left out, and only the release dates and the nature of each document remain.

• September 13, 2022: August 2022 CPI was released. At the time, headline CPI rose 8.3% year over year. This figure is not month-over-month or core CPI; it compares headline CPI with the same month of the previous year.^{3Source 3US Bureau of Labor Statistics, Consumer Price Index News Release: August 2022}
• Meeting on December 13–14, 2022; minutes released January 4, 2023: The December FOMC's policy decision and the record of its discussions were released on different days.^{2Source 2Federal Reserve, Meeting calendars and information}
• January 12, 2023: December 2022 CPI was released. The "December" in the name is the reference month, not the release month.^{5Source 5US Bureau of Labor Statistics, Consumer Price Index News Release: December 2022}

The Order for Reading CPI and FOMC in the Crypto Market

For CPI, compare the forecast and actual figure for the same item, then check whether headline and core moved together. If you separate year-over-year from month-over-month and follow through to the detailed items, you can see the reasons that headlines saying "high" or "low" leave out.

For FOMC, read in this order: this meeting's rate decision, the future outlook, and the conditions attached to that outlook. If you set the minutes apart as a record of discussions released later, you won't confuse the nature of the announcements. Even if coin prices moved right after an announcement, it is hard to conclude that every rise and fall that day was caused by CPI or the Fed.^{6Source 6Federal Reserve Bank of Kansas City, Estimating the Effects of Monetary Policy: An Ongoing Evolution}

With CPI, the gap between expectation and reality comes first; with FOMC, the difference between this decision and the future outlook comes first. Reading these two separately helps you avoid the mistake of judging an entire announcement from a single news headline or price move.