Inflation in the U.S. softened more than expected in February, putting Federal Reserve rate cuts firmly back on the agenda as we approach spring and summer.
The latest report from the Bureau of Labor Statistics reveals that the Consumer Price Index (CPI) rose by just 0.2% in February, a significant departure from the anticipated 0.3%. This figure also marks a decrease from January’s rate of 0.5%. Year-over-year, the headline CPI stood at an increase of 2.8%, slightly lower than the forecasted 2.9% and down from January’s 3.0%.
When we consider Core CPI, which excludes volatile food and energy prices, it similarly increased by 0.2% in February, again below the expected 0.3% and reduced from January’s 0.4%. On a year-over-year basis, the core CPI is clocking in at 3.1%, compared to expectations of 3.2% and January’s 3.3%.
In response to these data points, the price of bitcoin (BTC) surged more than 1%, reaching $84,100 shortly after the release of the report.
It’s worth noting that the past few weeks have been challenging for markets, including cryptocurrencies, as rising concerns about tariff-induced economic slowdowns have dampened previously buoyant prices. Compounding these worries, inflation rates have remained stubbornly above the Federal Reserve’s 2% target, raising questions about the central bank’s ability to relax monetary policy in the face of potential economic sluggishness. Following another down day for the stock market, the S&P 500 index has fallen approximately 10% over the last month. Bitcoin, which previously hit a record high of $109,000 just before President Trump’s inauguration on January 20, saw its price tumble around 30% at one point earlier this week.
Before today’s inflation report, interest rate traders had estimated a 40% chance for a rate cut by the Federal Reserve in May, and an 85% probability of one or more cuts by the time of the June meeting.
Looking forward, the upcoming Producer Price Index (PPI) report may either reinforce or challenge today’s findings, offering further insight into inflationary trends and the Federal Reserve’s potential course of action regarding interest rates.
