U.S. Inflation Slows to 2.8%, Stock Markets Rally; Fed Likely to Delay Rate Cuts

Key Takeaways:

• U.S. inflation slowed in February, with CPI rising 2.8% year-over-year, below the expected 2.9%, signaling easing price pressures.
• The Federal Reserve is unlikely to rush rate cuts, as core inflation remains at 3.1%, with most analysts expecting the first cut no sooner than May 2025.
• Stock markets rallied, with the S&P 500 gaining 0.8%, the Nasdaq surging 1.6%, and tech stocks like Nvidia (+6%), Meta (+4%), and Tesla (+8%) rebounding sharply.
• While Bitcoin stabilized near $82,700, experts warn of potential crypto market volatility, and external risks like tariffs could still fuel future inflationary pressures.

Inflation Slows Below Expectations

Inflation in the U.S. eased more than expected in February, with the headline Consumer Price Index (CPI) rising 2.8% year-over-year, below the anticipated 2.9%. This marks a slowdown from January’s 3% increase, signaling that inflationary pressures may be moderating. On a month-on-month basis, inflation rose by 0.2%, softer than the expected 0.3%, according to data released by the Bureau of Labor Statistics.

Federal Reserve Likely to Delay Rate Cuts

The “core” inflation rate, which excludes volatile food and energy prices, came in at 3.1% year-over-year, slightly below estimates of 3.2%. While the Federal Reserve targets a 2% annual inflation rate, the current figures indicate that they may not rush to lower interest rates.

Although the CPI report eased immediate concerns about inflation, it did not drastically shift expectations for near-term rate cuts. Most analysts still anticipate the first cut in May 2025 or later, depending on further economic data. The Fed remains cautious, watching for more sustained inflation declines before making any policy moves.

Stock and Crypto Markets Respond to CPI Data

Financial markets rallied in response to the softer inflation report, with the S&P 500 snapping a three-week losing streak on Wednesday, climbing 0.8%. The Nasdaq Composite surged 1.6%, led by a strong rebound in technology stocks, while the Dow Jones Industrial Average edged up by 25 points.

Investors poured into beaten-down tech stocks following the CPI data release, pushing Nvidia up by over 6%, while Meta Platforms and Tesla gained 4% and 8%, respectively. The optimism stemmed from expectations that easing inflation could support the case for rate cuts later in the year, even if the Federal Reserve remains patient in the short term.

Meanwhile, crypto markets showed mixed signals. Bitcoin stabilized near $82,700 after recent dips, as some traders viewed the inflation slowdown as a potential dovish signal from the Federal Reserve. However, expert posts on X (formerly Twitter) suggested that crypto markets could experience increased volatility following the CPI data release. While some traders saw the news as a “buy-the-dip” opportunity, uncertainty remains about how rate expectations will evolve in the coming months.

Caution Remains Amid External Risks

While the latest data offers reassurance that inflation is trending downward, policymakers remain cautious. Some analysts warn that external factors, such as tariffs and supply chain disruptions, could reignite inflationary pressures in the coming months. The Federal Reserve’s next steps will likely depend on how inflation and economic conditions evolve in the lead-up to their policy meetings.