US Inflation Drops Below Expectations – Will the Fed Cut Interest Rates?

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In February, the US Core Inflation rate declined from 3.3% to 3.1%, and the US Inflation rate dropped from 3% to 2.8%. The inflation index releases have left many surprised, as the general expectation was that the core inflation rate would drop from 3.3% to 3.2% and the inflation rate would decline from 3% to 2.9%. The development has triggered discussions on Fed rate cuts. Will the US Federal Reserve cut interest rates? Let’s analyse!  

US Inflation Falls Below Expectations 

Both the US Core Inflation rate and the Inflation rate declined in February, compared to January 2025. It is the first time since July 2024 that both of these indexes have simultaneously dropped. In July 2024, the core inflation slipped from 3.3% to 3.2%, and the inflation rate decreased from 3% to 2.9%. 

The consistent drop in inflation rates between January and July 2024 was one of the reasons that encouraged the Federal Reserve to announce a series of interest rate cuts post July. 

In September, for the first time since July 2023, the interest rate was lowered from 5.5% to 5%. In November, it was reduced from 5% to 4.75%. In December, it was lowered to 4.5% from 4.75%. 

Will the Fed Cut Interest Rates?

Cooling inflation means there is a high chance of an interest rate cut in the US. 

According to reports, the possibility of a rate cut in May has grown from 10% to 31.4%, while the likelihood of a cut by year-end has increased from 6.5% to 32.5%. The chance of four rate cuts this year has surged from 1% to 21%. 

Bitcoin Drops Despite Positive Inflation News 

In the last 30 days, the Bitcoin price has dropped by 15.3%. In the last seven days alone, the price has slipped by 9.3%. Yesterday, the Bitcoin market rose from $82,914.61 to $83,660.58. Currently, the market stands at $83,165.61 – at least 0.59% below yesterday’s closing price.