According to the US Consumer Price Index (CPI) data, inflation eased to 2.8% in February. This was a positive surprise, lower than the expected 2.9%.
The lower-than-expected inflation figure has boosted risk appetite. Traders now believe the Fed is more likely to cut rates by the end of this year.
US CPI at 2.8%, lower than expected
Bitcoin (BTC) rose slightly to $83,371. With lower inflation, the likelihood of further tightening has decreased, and risk-on sentiment is being supported. The stock market also reacted positively, with major indices rising after the announcement.
While February inflation eased, the core CPI rose to 3.1%, exceeding the expected 3.2%. If inflation continues to decline, the Fed may shift to a more dovish stance, which could lead to more liquidity flowing into the market.
Many analysts see this as a favorable wind for Bitcoin. Bitcoin has historically benefited from accommodative monetary conditions. All eyes are now on the Fed's policy guidance, and traders are looking for confirmation that a rate cut path is opening up.
"High numbers will not be welcomed (as always). Especially in the current uncertain market environment, such economic data has a greater impact. High numbers could push bond yields back up, which is the opposite of what the current administration is trying to achieve. Also, there is an FOMC next week, and the Fed will be closely watching this CPI number." - Analyst Daan Crypto Trades mentioned.
Meanwhile, this CPI data came after the positive JOLTS report released on Tuesday, which provided the market with a reason to halt the decline. Specifically, Federal Reserve Chair Jerome Powell said on Friday that the US central bank will take a cautious approach to monetary policy easing and added that the current economy is in "good shape".
