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The latest inflation report from the U.S. showed a sharper-than-expected decline in February, fueling expectations that the Federal Reserve may move toward interest rate cuts. Bitcoin and the Nasdaq 100 reacted positively to the data, while investors now shift their focus to the upcoming Producer Price Index (PPI) report on Thursday. Rate cut expectations for June have surged to 85%.
Inflation Data Sparks Market Optimism
According to the Bureau of Labor Statistics, the Consumer Price Index (CPI) increased by just 0.2% in February, falling short of market expectations of 0.3% and significantly lower than January’s 0.5% rise. On a year-over-year basis, inflation stood at 2.8%, slightly below the forecasted 2.9%.
Core inflation, which excludes volatile food and energy prices, followed a similar trend. Monthly core CPI rose by 0.2%, down from January’s 0.4% increase and below the 0.3% consensus estimate. The annual core CPI figure came in at 3.1%, undercutting the anticipated 3.3%.
Bitcoin and Stocks React to the Inflation Report
Following the data release, Bitcoin (BTC) saw an immediate 1% jump, climbing to $84,100. The Nasdaq 100 futures also gained 1.5%, reflecting increased confidence in risk assets. However, bond yields, the U.S. dollar, and gold remained relatively unchanged.
Markets have been volatile in recent weeks, as persistent inflation above the Fed’s 2% target has created uncertainty over the timing and scale of future rate cuts. Over the past month, the S&P 500 has dropped nearly 10%, while Bitcoin has fallen about 30% from its early-year peak of $109,000.
Rate Cut Expectations Surge
The latest inflation figures have strengthened the case for a Fed rate cut. Current market pricing suggests a 40% probability of a rate cut in May, with the likelihood of at least one rate reduction by June rising to 85%.
However, all eyes are now on the Producer Price Index (PPI) report set to be released on Thursday. If PPI data confirms a continued slowdown in inflation, expectations for a Fed rate cut could solidify. Conversely, stronger-than-expected PPI figures may prolong market uncertainty and volatility.
Turkish NY Radio will continue to track these developments, providing insights into how inflation trends and Fed policy decisions shape financial markets.
