Lower US inflation sparks speculation on rate cuts
The latest U.S. Consumer Price Index (CPI) report shows core inflation easing to 3.1% in February, slightly below the expected 3.2%.
This cooling inflation has fueled speculation that the Federal Reserve may cut interest rates later this year, potentially injecting liquidity into financial markets.
According to Matt Mena, a crypto strategist at 21Shares, market expectations for rate cuts have surged.
"Markets now price a 31.4% chance of a cut in May, up over threefold from last month," Mena stated.
Expectations for three cuts by year-end have also risen to 32.5%, with a 21% probability of four cuts.
Despite this optimism, Bitcoin's price has declined slightly, trading around $83,000 as of March 12, down from over $84,000 earlier in the day.
Analysts attribute this drop to ongoing macroeconomic uncertainties, including U.S. trade tensions and Federal Reserve policy.
Federal Reserve Chairman Jerome Powell has signaled caution regarding rate cuts.
In February, Federal Reserve Governor Christopher Waller emphasised that the bank should pause cuts until inflation is firmly under control.
However, some analysts believe political and economic pressures could accelerate rate reductions.
Market analyst Anthony Pompliano speculated that President Donald Trump might be leveraging market volatility to push for lower interest rates.
The U.S. government faces $9.2 trillion in debt maturing by 2025, and refinancing at current rates could significantly increase national debt and interest payments.
The CPI report also revealed a decline in headline inflation to 2.8%, marking the first drop since mid-2024.
This has reinforced expectations that the Federal Reserve may hold rates steady at its next meeting in March but could consider cuts by mid-year if inflation continues to cool.
Lower interest rates are generally seen as favorable for risk-on assets like Bitcoin and equities, as they reduce borrowing costs and increase liquidity.
However, the timing and magnitude of potential rate cuts remain uncertain, leaving markets closely watching upcoming economic data and Federal Reserve decisions.
Disclaimer: The content of this article solely reflects the author's opinion and does not represent the platform in any capacity. This article is not intended to serve as a reference for making investment decisions.
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