Inflation Slows in the US, Boosting Expectations of Fed Rate Cuts
Inflation in the United States slowed more than expected in February, with an annual CPI of 2.8% compared to the anticipated 2.9%. This has reinforced expectations of interest rate cuts by the Fed. The Bitcoin immediately reacted to this announcement by surging beyond $84,000, benefiting from the anticipation of monetary easing. Markets now estimate a 40% probability of the first rate cut in May, and 85% by June, awaiting the next key indicator of PPI on Thursday.
A Slowdown in Inflation Rekindles Hope of Rate Cuts
Inflation in the United States has slowed more than expected in February, strengthening expectations of interest rate cuts by the Federal Reserve in the coming months. According to the Bureau of Labor Statistics, the Consumer Price Index (CPI) rose by 0.2% for the month, against an estimated 0.3% and an increase of 0.5% in January. On an annual basis, overall inflation stands at 2.8%, slightly below the projected 2.9% and the previous month’s level of 3.0%.
The underlying inflation (Core CPI), which excludes volatile prices of energy and food, also experienced a slowdown with a 0.2% increase for the month, compared to the expected 0.3% and 0.4% in January. On an annual basis, it shows 3.1%, below the projected 3.2% and the 3.3% recorded in January.
Bitcoin Immediately Reacts and Surpasses $84,000
The markets immediately reacted to this release, and the Bitcoin (BTC) price jumped by more than 1%, reaching $84,100 within minutes. The announcement of more moderate inflation reinforces the assumption of upcoming monetary easing, which benefits riskier assets like cryptocurrencies.
This rebound comes after several difficult weeks for the financial markets, marked by concerns related to the economic slowdown provoked by trade tensions and inflation levels still above the Fed’s 2% target. The S&P 500 has lost about 10% in the last month, while Bitcoin, after reaching a historical peak of $109,000 in January, had dropped nearly 30%.
Fed Under Pressure: Rate Cuts in May or June?
Prior to the publication of these figures, the money markets anticipated a 85% chance of one or more rate cuts by the Fed’s June meeting, with a 40% probability of the first easing as early as May. These new data could solidify these forecasts and reignite investor optimism.
The next key indicator will be released on Thursday with the Producer Price Index (PPI), which could confirm or refute the trend observed today. This report will be closely scrutinized by the Fed and the markets to assess whether inflation continues to decline and whether a cycle of rate cuts becomes inevitable.
