A sharp slowdown in growth and accelerating inflation threaten the stability of the US economy

Cryptocurrency markets have faced a new wave of uncertainty following the release of US economic data for December 2025 and the fourth quarter. The latest economic statistics revealed a concerning scenario: as inflation accelerates, economic growth significantly slows down. This classic data conflict typically creates maximum volatility in risky asset markets.

What the economic indicators showed

Official US economic statistics delivered several unpleasant surprises. The core Personal Consumption Expenditures (PCE) index increased by 0.4% month-over-month, against expectations of 0.3% and the previous 0.2%. Year-over-year, the core PCE rose to 3.0%, while analysts forecasted 2.9%. This indicates an acceleration of inflationary pressures, which the Federal Reserve has been systematically trying to bring back to its 2% target.

The most surprising figure was the GDP growth rate. Quarterly US GDP growth was 1.4%, compared to the forecasted 2.8% and the previous 4.4%. This means the growth rate has slowed more than threefold. The GDP deflator also exceeded expectations, rising to 3.7% quarterly versus the forecasted 2.8%. At the same time, household spending remained relatively stable at 0.4% month-over-month, but the structure shifted: services continued to increase in price, while spending on goods decreased.

Stagflation: the US economy on a dangerous edge

This combination of data points to the risk of stagflation — a condition where the economy experiences weak growth alongside high inflation. The US economy is losing momentum, but inflationary pressures remain strong, especially in the services sector where prices stay persistently high. This is significantly different from the ideal “soft landing” scenario that optimists hoped for.

Household consumption has not yet shown signs of a crisis, but the trend raises concerns. Along with slowing economic growth, this creates an extremely difficult situation for the central bank: it is impossible to fight both inflation through rate hikes and economic slowdown through rate cuts simultaneously.

How the Fed might respond to the data

The released US economic data complicate the prospects for a quick easing of monetary policy. After such inflation figures, the market will find it harder to expect a rapid reduction in interest rates. The Federal Reserve leadership will likely maintain a hawkish stance, at least until the change of the chair in May.

The logic behind Fed Chair Powell’s statements may be based on the following argument: although economic growth has weakened, inflation is not yet defeated and requires further control. The likelihood of a quick rate cut after this data package has significantly decreased. The central bank’s hawkish position will probably be maintained for at least several more months.

Conflicting signals and crypto market volatility

For the cryptocurrency market, this data set has created a conflicting situation. On one hand, US economic slowdown generally supports expectations of rate cuts, which is positive for risk assets. On the other hand, rising inflation gives the Fed an argument to stay hawkish, which puts downward pressure on crypto and stock prices.

In such moments, market volatility increases, and the direction of BTC and altcoins depends on which aspect begins to dominate the reassessment. If long-term bond yields rise and the DXY dollar index strengthens, it will pressure Bitcoin. Conversely, if the market concludes that the US slowdown outweighs and the Fed will eventually have to ease, a retracement after the initial nervous reaction is possible.

Currently, the crypto market has reacted with a decline. Bitcoin faces short-term pressure, but long-term trends remain mixed. The BTC price is $67,540 with a daily change of -0.92%, reflecting the volatility typical of periods of high uncertainty regarding monetary policy.

What to expect for the US economy in the coming months

The recent US economic data cast doubt on previous investor expectations. Now, uncertainty has arisen: will there be a controlled slowdown or is the economy heading toward a more serious stagnation? Risks related to both inflation and recession remain real. The crypto market will focus on further Fed decisions, employment and consumption data, and the dollar’s dynamics amid high uncertainty about the trajectory of interest rates.