#CryptoCPIWatch #CryptoCPIWatch
Core CPI for February is expected to be 2.9% year-on-year, down from 3.0% in January.
Core CPI is expected to be at 3.2%, a slight decrease from the previous 3.3%.
The outlook for the US Federal Reserve's rate cuts may change according to CPI data.
Cryptocurrency markets, stocks, and fluctuations in the US dollar depend on inflation trends.
US inflation data is expected to show cooling, but risks persist
The US Bureau of Labor Statistics (BLS) will release its Consumer Price Index (CPI) report for February on Wednesday at 12:30 GMT, which provides a crucial perspective on inflation trends. Market analysts anticipate a slight decline in inflation, which could influence Federal Reserve policy, the US dollar, and risk assets such as cryptocurrencies.
The general CPI inflation rate is expected to be 2.9% year-on-year, down from 3.0% in January, marking the first dual decline in both core and general inflation since July 2024. The core CPI inflation rate, which excludes food and energy, is projected to fall to 3.2% from 3.3%.
Monthly inflation projections:
General CPI: +0.3% month-on-month
Core CPI: +0.3% month-on-month
TD Securities analysts predict a widespread slowdown in inflation, noting that housing costs and goods prices could decrease, contributing to a trend toward deceleration.
How CPI data could affect the Federal Reserve's rate decision
The Federal Reserve has shown caution regarding rate cuts, and its chairman Jerome Powell stated last week that economic conditions remain "solid," but inflation must cool further before monetary easing is considered.
Markets have already priced in 85 basis points (bps) of rate cuts in 2025, but persistent inflation could force the Fed to maintain a restrictive stance. On the other hand, more moderate inflation could solidify expectations of rate cuts starting in June or July.
Impact scenarios:
CPI lower than expected (below 2.9%) → Fed rate cuts could accelerate, the dollar weakens, risk assets rise (cryptocurrencies, stocks).
CPI higher than expected (above 3.0%) → The Fed maintains a restrictive policy, the USD strengthens, stocks and cryptocurrencies fall.
Trump's trade policies increase inflationary uncertainty
While inflation may be decreasing, President Donald Trump's trade policies pose new risks. His administration has imposed tariffs on China, Canada, and Mexico, which could lead to higher import prices and supply chain disruptions, potentially reigniting inflationary pressures.
Historically, the Federal Reserve has dismissed tariffs as isolated inflationary events, but if these policies escalate, inflation could remain stubbornly high, limiting the Fed's ability to cut rates.
Cryptocurrency markets and the inflation report
Cryptocurrency markets remain directionless ahead of the CPI update, with Bitcoin (BTC) trading around $82,185, a 25% drop from its peak, and Ethereum (ETH) at $1,889, marking a weekly loss of 16.2%.
Cryptocurrency investors are closely monitoring inflation data:
Lower inflation → Bullish for Bitcoin and altcoins as Fed rate cuts become more likely.
Higher inflation → Worse for cryptocurrencies as the Fed remains restrictive, boosting the US dollar.
Current sentiment in the cryptocurrency market:
Bitcoin: +0.57% to $82,185
Ethereum: -1.75% to $1,889
XRP: +1.6%
Dogecoin: +2.5%
Solana, Cardano: slight declines
Meanwhile, CoinShares' weekly digital asset fund flow report showed $876 million in outflows, marking the fourth consecutive week of outflows from digital asset investments, leading to increased market volatility.
The US CPI report will be a key catalyst for the Federal Reserve's political outlook, the US dollar, and risk assets such as cryptocurrencies and stocks. While inflation is expected to moderate, Trump's trade policies, supply chain disruptions, and market uncertainty could keep the Fed cautious.
Investors should prepare for increased volatility across all asset classes, and cryptocurrency markets are particularly sensitive to surprises.
