U.S. CPI Holds Steady at 2.4% as Iran War Raises Inflation Concerns

The U.S. CPI remained unchanged in February, coming in line with expectations. However, the war in Iran continues to raise concerns about inflation trending higher this year, while crypto traders are reducing their bets on how many rate cuts the Fed is likely to make in anticipation of higher inflation.

U.S. CPI Remains Unchanged at 2.4% In February

Bureau of Labor Statistics data shows that CPI remained at 2.4% year-over-year (YoY) in February, in line with expectations. The monthly CPI came in at 0.3%, also in line with expectations but above the 0.25 recorded in January.

Core CPI also remained unchanged at 2.5%, in line with expectations, while the monthly data came in at 0.2%, down from the 0.3% recorded in January. Notably, the core U.S. CPI is currently at its lowest level in over four years, while the monthly figure is at its lowest in months.

The Bitcoin price climbed following the data release from a low of around $69,200. TradingView data show that the leading crypto is trading at around $70,800, up over 1% today.

As CoinGape reported, Bitcoin retreated earlier in the day as oil prices rebounded from yesterday’s lows. Volatile oil prices amid the U.S.-Iran war continue to put downside pressure on the leading crypto. At the same time, options, on-chain data, and technical charts point to a larger decline for BTC.

Rate Cut Expectations Drop As War Threatens To Send Inflation Higher

Crypto traders are reducing their rate-cut expectations this year as the war in Iran threatens to push inflation higher amid rising oil prices. Polymarket data show that these traders now expect only one or two cuts at most this year. This marks a decline from earlier in the year when the market was pricing in three rate cuts.

Polymarket data show there is only a 15% chance the Fed will make three rate cuts this year. Meanwhile, there is a 27% chance the Fed makes one or two cuts this year. As market commentator The Kobeissi Letter noted, the latest CPI reflects data from before the war in Iran began.

As such, the focus will be on the March data for signs of rising inflation. Before then, the Fed will hold its FOMC meeting next week, where it is expected to keep rates steady. CME FedWatch data shows a 99.3% chance that the Fed will hold rates steady.

Despite concerns about higher inflation due to the war in Iran, Fed Governor Chris Waller believes that any inflation shock will be short-lived. As such, he believes the focus should remain on the labor market, which appears to be weakening.