Relief From Inflation as the U.S. CPI Drops to Below Forecast 2.8% in February

Inflation in the United States slowed more than anticipated in February, strengthening the case for the Federal Reserve to begin cutting interest rates later this year. Lower-than-expected price increases have eased concerns about inflation remaining stubbornly above the Fed’s 2% target, leading to renewed optimism in both traditional and crypto markets.

According to the Bureau of Labor Statistics, the Consumer Price Index (CPI) rose 0.2% in February. This was lower than the projected 0.3% increase and significantly below January’s 0.5% rise. On an annual basis, headline CPI increased 2.8%, slightly under the 2.9% forecast and a drop from January’s 3.0% reading.

The core CPI, which excludes volatile food and energy prices, also slowed. It increased 0.2% for the month, below expectations of 0.3%, and down from January’s 0.4% rise. Annually, core inflation stood at 3.1%, compared to January’s 3.3% and below the expected 3.2%.

Following the inflation data release, Bitcoin (BTC) surged more than 1%, climbing to $84,100 as investors responded positively to the possibility of lower interest rates. The Nasdaq 100 futures also extended gains, rising 1.5%. In contrast, bonds, the U.S. dollar, and gold remained relatively unchanged, indicating investors focused on equities and cryptocurrencies.

Financial markets have experienced increased volatility in recent weeks, with crypto assets and stocks struggling amid concerns about an economic slowdown caused by tariff policies and persistent inflation pressures. The S&P 500 has dropped by around 10% over the past month, while Bitcoin briefly declined 30% from its all-time high of $109,000, which it reached just before President Trump’s inauguration on January 20.

Before the release of the CPI report, traders had priced in a 40% chance of a Fed rate cut in May and an 85% likelihood of at least one cut by June. The easing inflation numbers now add to the expectation that the Federal Reserve may shift toward a more accommodative monetary policy sooner rather than later.

Thursday’s Producer Price Index (PPI) report will provide further insight into inflation trends and whether the Fed’s rate-cutting plans remain on track. If producer prices also show a slowdown, it could reinforce the case for the Fed to lower interest rates in the coming months, providing additional relief for financial markets.

As inflation pressures ease and rate-cut expectations increase, investors will closely watch upcoming economic reports and Federal Reserve statements to gauge how monetary policy might evolve through spring and summer.