In February, inflation in the U.S. decreased more than anticipated, putting Federal Reserve rate cuts back on the agenda as we move toward spring and summer.
The Consumer Price Index (CPI) increased by 0.2% in February, as reported by the Bureau of Labor Statistics on Wednesday morning. The forecast had predicted a rise of 0.3%, following January’s increase of 0.5%. On an annual basis, the headline CPI was up 2.8%, slightly below the predicted 2.9% and down from January’s 3.0%.
Core CPI, which removes food and energy costs, also rose by 0.2% in February, while expectations were for a 0.3% increase and January saw a 0.4% rise. Year-over-year, the core CPI stood at 3.1%, compared to an anticipated 3.2% and January’s 3.3%.
Bitcoin (BTC) saw an increase of over 1%, reaching $84,100 in the moments after the data was released. In the realm of traditional markets, Nasdaq 100 futures extended an earlier rise, now up by 1.5%. Bonds, the dollar, and gold showed minimal changes.
Recent weeks have been challenging for markets, including crypto, as previously strong prices have been disrupted by fears of economic slowdown due to tariffs. Compounding these worries, inflation has persistently remained above the Fed’s 2% target, raising doubts about whether the central bank could even lower rates to address any potential economic sluggishness. Following yet another down day yesterday, the S&P 500 has dipped nearly 10% over the last month. At one point this week, Bitcoin had plummeted around 30% from its peak of $109,000 reached just before President Trump’s inauguration on January 20.
Before today’s report, traders had estimated about a 40% probability of a Fed rate cut in May and an 85% chance of one or more cuts by the meeting in June.
Looking ahead, the Producer Price Index (PPI) report on Thursday could either support or challenge today’s findings, offering additional insights into inflation trends and the likelihood of Fed rate adjustments.