US Inflation Cools Faster Than Expected, Paving the Way for Fed Rate Cuts!

US Inflation Cools Faster Than Expected, Paving the Way for Fed Rate Cuts!

Inflation in the US eased more than anticipated in February, reinforcing expectations that the Federal Reserve may move forward with interest rate cuts as the spring and summer months approach.

According to the Bureau of Labor Statistics report released Wednesday morning, the Consumer Price Index (CPI) increased by 0.2% in February, coming in below the expected 0.3% and slowing from January’s 0.5% rise. On an annual basis, headline inflation stood at 2.8%, slightly under the forecasted 2.9% and down from January’s 3.0%.

The core CPI, which strips out volatile food and energy prices, also saw a milder increase of 0.2% for the month, below projections of 0.3% and decelerating from January’s 0.4% rise. Year-over-year, core CPI registered at 3.1%, lower than the expected 3.2% and January’s 3.3%.

Financial markets reacted swiftly to the data. Bitcoin (BTC) jumped more than 1%, climbing to $84,100 in the immediate aftermath of the release. Meanwhile, Nasdaq 100 futures extended their earlier gains, advancing 1.5%. Bonds, the U.S. dollar, and gold showed little movement.

The past few weeks have been turbulent for financial markets, including cryptocurrencies, as fears of an economic slowdown—partly fueled by tariffs—have weighed on sentiment. Stubbornly high inflation had also cast doubt on whether the Fed would have room to ease policy amid slowing growth concerns. The S&P 500 has dropped approximately 10% over the past month, while Bitcoin had plunged nearly 30% from its all-time high of $109,000, reached just before President Trump’s inauguration on January 20.

Prior to the CPI report, market participants had priced in roughly a 40% probability of a rate cut in May and an 85% chance of at least one cut by June.

Looking ahead, Thursday’s Producer Price Index (PPI) report will offer additional clues on inflation trends and could either reinforce or challenge today’s data, shaping expectations for the Fed’s next moves.