Inflation cooled more than expected in February, offering hope that the Federal Reserve may be closer to cutting interest rates. However, the crypto market remained largely unresponsive despite the positive economic signal.
Wednesday’s Consumer Price Index report showed that inflation eased to 2.8% over the past 12 months, down from 3% in January and slightly beating the 2.9% forecasted by economists.
Perhaps surprisingly, crypto prices were unresponsive. Bitcoin (BTC) was trading at $82,770.45 late Wednesday afternoon, roughly flat over the past 24 hours. The total crypto market was valued at $2.68 trillion, down 0.25% over the past day.
Read more: Crypto faces short-term volatility, but long-term growth persists: BitGo exec
Dr. Yang: ‘Tariffs could make inflation stickier’
Dr. Youwei Yang, Chief Economist at NYSE-listed BIT Mining, said in a statement obtained by crypto.news that the market’s muted reaction reflects deeper fears about policy risks, particularly from President Trump’s new trade tariffs.
“Today’s lower-than-expected CPI should be bullish, signaling faster rate cuts, but crypto hasn’t reacted strongly,” Yang said. “Weeks of market fear require more than a single good print to regain confidence.”
Yang pointed to Trump’s aggressive tariffs on steel and aluminum, which took effect on Wednesday, as a potential headwind for inflation and market stability. The tariffs have already triggered retaliatory measures from Europe on $28 billion worth of U.S. goods, set to begin in April.
“The real issue is Trump’s aggressive tariffs, which risk making inflation stickier while also crashing markets and triggering layoffs, particularly by the Department of Government Efficiency (DOGE),” Yang explained.
This creates a tough position for the Federal Reserve. “High inflation from tariffs makes rate cuts harder,” Yang said. “But market crashes and job losses pressure the Fed to cut rates sooner. Cutting too early could reignite inflation, making future policy tougher.”
Crypto markets want clearer policy signals
Yang noted that crypto markets are holding back due to uncertainty over future policy direction.
“Investors want stronger support from the White House or Fed, especially after last week’s crypto summit failed to reassure markets,” he said.
The recent crypto White House summit, which brought together industry heavyweights and government officials, was expected to usher in more favorable guidance on crypto regulations. However, the lack of concrete outcomes left markets unsure about the administration’s position on crypto.
“Until clearer signals emerge, fear and uncertainty will weigh on crypto market sentiment,” Yang concluded.
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