The February Consumer Price Index (CPI) data to be announced by the US Department of Labor today, March 12, 2025, is of great importance for both the US economy and global markets. Inflation data plays a decisive role in the monetary policy decisions of the US Federal Reserve (Fed). These data will provide critical clues for understanding the course of inflation and therefore the future of monetary policies.
CPI Expectations and Previous Data
Market expectations are for the annual CPI to be realized as 2.9% in February. This rate is slightly below the previous month's 3.0% data. On a monthly basis, the CPI is expected to increase by 0.3%; this increase was recorded as 0.5% in January. A monthly increase of 0.3% is also expected in the core CPI (excluding food and energy); this indicates a slowdown compared to the previous month's 0.4% increase.
The Effect of Inflation on the Fed's Interest Rate Policies
If the annual CPI, which was 3% in January, falls to 2.9%, the Fed's hand will be strengthened for interest rate cuts. Because the downward trend in inflation will create space for the Fed to ease its tight monetary policy. If the announced inflation data comes in line with expectations or lower, the pressure on the Fed to "lower interest rates" will increase.
What Does It Mean for Cryptocurrencies?
We think that the US inflation data to be announced today will be important in market pricing.
If the inflation data comes in line with expectations or lower:
The expectation of the Fed's interest rate cut strengthens.
A buying wave can be seen in risky assets (stocks and cryptocurrencies).
An upward movement can be triggered in Bitcoin and altcoins.
If the inflation data comes in above expectations:
It is a signal that the Fed will not rush to cut interest rates.
The tight monetary policy may continue, which may put pressure on risky assets.
There may be a selling wave in cryptocurrencies and stocks.
If inflation data of 2.9% or below is announced as expected, the markets will respond positively. In particular, data coming in at 2.8% or below may be a strong signal for the rise of cryptocurrencies.
Macroeconomic Risks and Pressure on the Fed
Recently, US President Donald Trump's statements about the economy have also attracted attention. Trump is cornering the Fed with tariffs that could increase trade tensions by emphasizing the risk of recession and his rhetoric that fuels economic uncertainties. The main purpose of these moves is to pressure the markets and force the Fed to take faster action on interest rate cuts.
In short, lower than expected inflation data will open up space for the Fed to cut interest rates, while higher inflation data may lead to the continuation of tight monetary policy and pressure on the markets. While low inflation is a bullish signal for crypto markets, high inflation indicates that the pressure will continue.
Author: Besim Şen
