Markets Await Trump’s First Inflation Report Amid Hopes for Economic Softening

Trump’s First Inflation Report Looms as Markets Hope for Rate Cut Signals

A cooling inflation trend could boost expectations for interest-rate cuts, potentially benefiting risk assets like cryptocurrencies and equities.

The U.S. is set to release its first Consumer Price Index (CPI) report under President Donald Trump’s administration on Wednesday. With inflation pressures showing signs of easing, investors are eager to see if the data will reinforce the case for lower interest rates after months of market volatility.

Economists expect headline inflation to have inched down to 2.9% year-over-year from 3%, while core inflation—which strips out volatile food and energy prices—is projected to decline to 3.2%. If these figures hold, it would mark the first notable slowdown after four consecutive months of rising inflation.

In recent weeks, financial markets have struggled amid concerns over inflation and monetary policy. The S&P 500 has slid nearly 10% from its all-time high, while Bitcoin (BTC) has tumbled approximately 30% to trade near $80,000. Lower interest rates could help improve investor sentiment and reignite demand for riskier assets.

President Trump and Treasury Secretary Scott Bessent have prioritized reducing 10-year Treasury yields as part of their broader economic plan. So far, their efforts seem to be working, with the 10-year yield declining from 4.8% to 4.2%, the U.S. Dollar Index (DXY) dropping below 104, and crude oil prices stabilizing in the mid-$60s. These shifts align with the administration’s strategy to ease financial conditions.

Meanwhile, the Truflation Index has fallen to 1.35%, its lowest level since September 2020, signaling progress in bringing inflation down. However, with five- and 10-year inflation expectations still above 2%, Trump’s economic team faces ongoing challenges in managing long-term price stability.

As the Federal Open Market Committee (FOMC) prepares for its March 18-19 meeting, markets anticipate that Chair Jerome Powell will hold the federal funds rate steady at 4.25%-4.50%, according to the CME FedWatch Tool.

Investors will be closely watching the CPI report for clues about the Federal Reserve’s next move. A softer-than-expected reading could increase the likelihood of rate cuts, while a hotter-than-expected inflation print may force the Fed to maintain its restrictive stance, keeping pressure on financial markets.

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