Investors Eye Trump’s First Inflation Report for Hints of Slowing Prices

Trump’s First Inflation Report in Focus as Markets Bet on Rate Cuts

A cooling inflation trend could strengthen the case for interest-rate cuts, providing a potential boost to risk assets like cryptocurrencies.

On Wednesday, the U.S. will release its first Consumer Price Index (CPI) report under President Donald Trump’s administration. A weaker-than-expected reading could increase the likelihood of rate cuts, offering some relief to investors who have endured recent market turbulence.

Economists anticipate that headline inflation will have edged down to 2.9% year-over-year from 3%, while core inflation—which strips out food and energy—may decline slightly to 3.2%.

A slowdown in inflation typically makes riskier investments more attractive, as it raises expectations for looser monetary policy. The CPI has been rising for the past four months, making this potential downturn a key moment for markets.

Over the past few weeks, the S&P 500 has slid nearly 10% from its all-time high, while Bitcoin (BTC) has dropped roughly 30% to around $80,000, reflecting investor concerns over persistent inflation and tight monetary policy.

Both President Trump and Treasury Secretary Scott Bessent have stressed the importance of lowering 10-year Treasury yields to create room for a lower federal funds rate. Their strategy appears to be making headway, with the 10-year yield declining to 4.2% from 4.8%, the U.S. Dollar Index (DXY) falling below 104, and crude oil prices stabilizing in the mid-$60s—all key elements of the administration’s broader economic outlook.

At the same time, the Truflation Index has hit 1.35%, its lowest point since September 2020. However, long-term inflation expectations remain above 2%, underscoring the challenges Trump faces in maintaining price stability.

As the Federal Open Market Committee (FOMC) prepares for its March 18-19 meeting, Chair Jerome Powell is widely expected to keep interest rates steady at 4.25%-4.50%, according to the CME FedWatch Tool.

Investors will be paying close attention to the inflation report. A softer-than-expected print could push the Federal Reserve toward rate cuts sooner rather than later, while a stronger reading might force policymakers to maintain higher rates, prolonging market pressure on risk assets.