The U.S. Bureau of Labor Statistics has unveiled the highly anticipated Consumer Price Index (CPI) inflation figures for February, revealing a hotter-than-expected reading of 3.2% in US inflation. This development has sparked concerns among investors in both the cryptocurrency and stock markets, who are now eagerly seeking insights into potential Federal Reserve rate adjustments.
Following the surprising 3.1% CPI inflation recorded last month, the likelihood of Federal Reserve rate cuts has been pushed back to June, with some analysts even speculating that rate adjustments could commence as early as September. Current projections from CME FedWatch data suggest a probability of over 60% for 25 basis points rate cuts in June, followed by an additional 25 basis points cut in July.
The February CPI data indicates a notable increase in the US annual inflation rate to 3.2%, surpassing expectations and maintaining levels not seen since 2021. This uptick was primarily driven by a surge in gasoline prices, with consumer prices rising by 0.4% from the previous month. Despite a slight slowdown, the annual core CPI inflation remained elevated at 3.8%, reflecting a continued gradual disinflation process in the US.
In response to the CPI release, US equity futures and European stocks have shown stability, although traders anticipate heightened market volatility. The US dollar index (DXY) has remained near 102.85, with expectations of increased volatility. Additionally, the US 10-year Treasury yield, which initially fell to 4.087%, has risen to 4.110% following the CPI data.
According to prediction markets on Kalshi, expectations for interest rate cuts in 2024 have decreased to less than three, following consecutive months of CPI increases. JPMorgan CEO Jamie Dimon has advocated for the Federal Reserve to refrain from cutting interest rates amid uncertainties about the economy’s condition, emphasizing the possibility of a soft landing.
Meanwhile, the price of Bitcoin (BTC) has exhibited volatility following the CPI release, currently hovering above $72,000. Although trading volume has seen a slight uptick, market analysts predict a period of consolidation in the coming weeks, highlighting the need for a temporary pause before a potential rally. Despite ongoing market challenges, Bitcoin continues to be viewed as a hedge against inflation, with potential for sustained price growth in the future.