Summary Highlights:
February CPI expected at 2.9% YoY, down slightly from January’s 3.0%.
Core inflation forecasted to dip to 3.2% from 3.3%.
CPI results may shift Fed's stance on rate cuts.
Inflation trends to steer stocks, crypto, and the US dollar.
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CPI Data Could Show Cooling, but Caution Lingers
The US Bureau of Labor Statistics is releasing February’s Consumer Price Index (CPI) report on Wednesday at 12:30 GMT. Analysts expect a slight dip in both headline and core inflation, possibly signaling a continued cooling trend in price pressures. If confirmed, this would mark the first back-to-back decline in both indicators since July 2024.
Forecasts:
Headline CPI: 2.9% YoY, +0.3% MoM
Core CPI (excludes food and energy): 3.2% YoY, +0.3% MoM
TD Securities notes that falling housing costs and goods prices could be key drivers behind the expected slowdown.
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Fed Policy: Will Cooling Inflation Prompt Rate Cuts?
Federal Reserve Chair Jerome Powell recently emphasized that while the economy remains strong, inflation must retreat further before rate cuts are on the table. Markets are currently pricing in about 85 basis points of rate cuts in 2025.
Possible Outcomes:
If CPI is softer than expected (<2.9%): Markets may expect earlier rate cuts; USD could weaken; stocks and crypto may rally.
If CPI is hotter than expected (>3.0%): Fed could delay easing; USD strengthens; risk assets could retreat.
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Trade Tensions Could Reignite Inflation
Despite signs of cooling, inflation could face fresh headwinds from President Trump’s trade policies. New tariffs on key trading partners like China, Mexico, and Canada could raise import costs and disrupt supply chains. Historically, the Fed has viewed tariffs as temporary price shocks, but prolonged tensions might keep inflation elevated and limit rate cuts.
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Crypto Outlook: Inflation Holds the Key
Bitcoin and other cryptocurrencies are trading sideways ahead of the inflation report. Bitcoin currently sits at $82,185, down 25% from its high, while Ethereum is at $1,889, losing over 16% in a week.
Market reactions to inflation data:
Lower CPI: Bullish for crypto, as Fed cuts become more likely.
Higher CPI: Bearish outlook, with tighter Fed policy and stronger dollar.
Current crypto snapshot:
Bitcoin$BTC : +0.57%
Ethereum$ETH : -1.75%
XRP$XRP : +1.6%
Dogecoin: +2.5%
Solana, Cardano: Minor losses
CoinShares also reported $876 million in outflows from crypto funds—the fourth straight week of withdrawals—adding to the market’s uncertainty.
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Bottom Line: Expect Market Jitters
This CPI report could be a pivotal moment for markets. While inflation is likely easing, geopolitical factors and trade policy risks may complicate the Fed's next move. Investors should prepare for sharp moves in stocks, crypto, and currencies as the data hits.
