1 min readMarket cautious as inflation pressures linger
US consumer prices increased by 0.2% in February, marking the slowest rise in four months. The core inflation measure, which excludes food and energy, also rose by 0.2%. Notable price declines were observed in airfares (down 4% month-over-month), new car prices (down 0.1%), and gasoline prices (down 1%), while grocery prices remained relatively unchanged. However, service prices excluding energy increased by 0.3%, apparel prices climbed 0.6%, and used vehicle prices rose by 0.9%, highlighting persistent inflationary pressures in certain categories.
Although the report provides some temporary relief, the market reaction has been negative, as the moderation in inflation was largely driven by falling airfares. The outlook remains cautious, with inflation expected to accelerate again due to tariff-related price hikes already being implemented by companies. The Federal Reserve is awaiting greater clarity on government policy and inflation trends before making any potential rate adjustments. Meanwhile, futures markets have begun to price in further potential rate cuts this year, while the US dollar continues to weaken.
Too soon to factor in DOGE decisions on payroll data
In labour market news, JOLTS job openings data aligns with payroll reports, signalling continued strength in the retail and trade sectors but weakness in transportation and professional services. Employees who remain on payroll during their notice periods are still counted as employed until they receive their final paychecks.
Despite Bitcoin encountering technical resistance at the 200-day moving average near US$77,000 and showing signs of recovery, digital asset funds continue to see outflows. This week’s outflows reached US$1.3 billion, bringing the total to US$6 billion over the past several weeks.
A controversial proposal (SIMD-0228) on the Solana blockchain aiming to reduce the token's inflation rate, which would have significantly lowered staking yields, failed last night as validators preferred maintaining higher yields despite the trade-off of increased inflation. Although this proposal has been halted for now, we expect similar proposals to arise as the network matures.
