The US Consumer Price Index (CPI) data for February recorded a stable annual rate of 2.4%, in line with analysts’ expectations. Although the data showed core inflation at a four-year low, the market is now worried that this figure no longer reflects the current reality in the energy market.
The recent military conflict between the US-Israel and Iran has caused crude oil prices to soar. Analysts warn that the February data was collected before the start of the war, meaning the true impact of energy inflation will only begin to be seen in the March report.
The impact of this uncertainty has caused crypto traders to start reducing expectations for monetary easing. According to Polymarket data, the market now expects only one or two interest rate cuts by the Federal Reserve (Fed) this year, compared to three cuts expected before the crisis began.
The price of Bitcoin showed a mixed reaction, bouncing back to $70,800 after the CPI data was released, but still facing selling pressure as oil prices rose. Technical indicators and on-chain data suggest there is a risk of a larger price correction for the digital asset in the near future.
The Federal Reserve is expected to keep interest rates on hold at next week’s FOMC meeting with a 99.3% probability. Despite concerns of stagflation, Fed Governor Chris Waller suggested that the focus should shift to the weakening labor market rather than the energy inflation shock, which is considered temporary.
