- U.S. inflation is expected to decline, potentially boosting financial market sentiment.
- A drop in inflation could lead to lower interest rates, favoring riskier assets like crypto.
- Kalshi traders predict cooling inflation, which could influence Federal Reserve policy.
The second U.S. inflation report for 2025 is set for release today, drawing significant market attention. Economists forecast a moderation in both the annual and monthly inflation rates. If these expectations hold, it would mark the first time since July 2024 that both figures declined in the same month. This could significantly impact market sentiment, particularly in the cryptocurrency sector, which is sensitive to inflation and interest rates.
Core Inflation Rate Fluctuations
The core inflation rate increased slightly in January 2025 from 3.2% to 3.3%, potentially fueling further price pressures. However, the forecast for February indicates that the trend may ease to 3.2% or even 3.1%. If the decline occurs, it will indicate that inflation is decreasing, which will increase market optimism and decrease some of the tension in the financial markets.
Similarly, headline inflation climbed from 2.9% to 3% in January. Analysts expect the inflation to settle at 2.9% in February, which will be the first time that both the core and the headline inflation will have declined in the same month since July 2024. This would signal a decline in inflation, easing concerns among investors about rising prices.
Kalshi Traders Predict Cooling Inflation
Kalshi traders who have been accurate in six out of the eight previous CPI reports expect the headline CPI to be at 2.9%. This strengthens the case for a trend of cooling inflation, which could influence the Federal Reserve’s interest rate decisions.
The inflation rates have fluctuated since September 2024. Core inflation ranged between 3.2% and 3.3%, while headline inflation trended upward throughout the period. February could mark a peak, signaling that inflationary pressures may be easing and price stabilization is on the horizon.
Related: Ethereum Faces Bearish Risk: Will It Drop to $1,000?
The impact of a decline in inflation could be significant in the crypto market. If inflation declines, the Federal Reserve may lower interest rates, benefiting riskier assets like cryptocurrencies. On the other hand, if inflation is high, the Fed may remain restrictive, which is not very favorable for investing in cryptocurrencies. Today’s CPI report could significantly impact market direction.
