#CryptoCPIWatch Report on US CPI: Is Inflation Decreasing or Sustained Pressure? What Does It Mean for Markets and Crypto

AI Summary

Key Points:

February CPI is expected to be 2.9% year-on-year, down from 3.0% in January.

Core CPI is projected at 3.2%, slightly down from the previous 3.3%.

The prospect of a decrease in US Federal Reserve interest rates may change based on CPI data.

Crypto, stock markets, and fluctuations in the US dollar depend on inflation trends.

US Inflation Data Expected to Decrease, But Risks Remain

The US Bureau of Labor Statistics (BLS) will release the February Consumer Price Index (CPI) report on Wednesday at 12:30 GMT, providing crucial insights into inflation trends. Market analysts anticipate a slight decrease in inflation, which could impact Federal Reserve policy, the US dollar, and risk assets such as cryptocurrencies.

The rate of core CPI inflation is expected to reach 2.9% year-on-year (YoY), down from 3.0% in January, marking the first dual decline in core and overall inflation since July 2024. The rate of core CPI inflation, which excludes food and energy, is projected to drop to 3.2% from 3.3%.

Monthly inflation projections:

Core CPI: +0.3% MoM

Core CPI: +0.3% MoM

Analysts at TD Securities expect a broad slowdown in inflation, noting that housing costs and the prices of goods may decrease, contributing to a loosening trend.

How CPI Data Can Affect Federal Reserve Interest Rate Decisions

The Federal Reserve has signaled caution regarding interest rate cuts, with Chair Jerome Powell stating last week that economic conditions remain "solid" but inflation must ease further before monetary easing is considered.

Markets have priced in an 85 basis point (bps) rate cut in 2025, but persistent inflation may compel the Fed to maintain an aggressive stance. Conversely, lower inflation could bolster expectations for rate cuts starting in June or July.

Impact scenario:

Lower CPI than