A favorable economic report has been released for the Federal Reserve. On the evening of February 13, Beijing time, data from the U.S. Bureau of Labor Statistics indicated that the U.S. Consumer Price Index (CPI) for January rose 2.4% year-over-year, falling below expectations. The core CPI increased 2.5% year-over-year, marking the lowest level since 2021. Following the data release, traders quickly increased their expectations for Federal Reserve interest rate cuts. The total amount of rate cuts anticipated for the year rose from 58 basis points on Thursday to 63 basis points, equivalent to a 50% probability of three rate cuts by year-end. Market expectations now assign a 30% chance of a rate cut in April and over an 80% probability for a cut in June.

Goldman Sachs interpreted the data, suggesting the CPI figures were not as strong as market fears had indicated, making the Fed's path toward "normalizing" rate cuts appear clearer. The firm expects two rate cuts from the Fed this year, with the next likely occurring in June.

In market movements, cryptocurrencies saw broad-based significant gains. As of 06:30 Beijing time on the 14th, Bitcoin surged over 4% to $68,842.5; Ethereum rose over 6%, and Solana jumped over 9%. Prices for spot gold and silver also strengthened collectively. By the close, spot gold had climbed over 2%, reclaiming a level above $5,000 per ounce, while spot silver advanced 2.81%. The three major U.S. stock indices opened lower but staged a collective rally during the session. The Nasdaq Composite turned lower towards the close, ending down 0.22%. The Dow Jones Industrial Average finished up 0.1%, and the S&P 500 edged up 0.05%.

The key U.S. data, released on February 13 Eastern Time, showed the U.S. January CPI increased 0.2% month-over-month, below the market forecast of 0.3%, with the previous month's increase at 0.3%. The year-over-year CPI gain of 2.4% also came in below the expected 2.5%, down from the previous 2.7%, hitting a new low since May 2025. The report indicated the core CPI (excluding food and energy) rose 0.3% month-over-month, matching expectations, with the prior reading at 0.2%. Year-over-year, core CPI increased 2.5%, aligning with forecasts and down from the previous 2.6%, representing the lowest level since 2021.

The rise in core inflation for January was primarily driven by service-related prices, including increases in airfare, personal care, recreation, medical care, and communication. Declines in prices for used cars and trucks, household furnishings, and motor vehicle insurance partially offset the upward pressure from services. Additionally, the core inflation increase reflected typical one-time price hikes at the start of the year and the pass-through of costs from broader tariffs implemented by the Trump administration.

Analyst Enda Curran noted the U.S. energy price index fell 1.5% in January, with the gasoline price index dropping 3.2% month-over-month, which clearly alleviated upward pressure on the headline CPI. As signs of easing price pressures accumulate, economists widely anticipate inflation will moderate further in 2026. Bloomberg Economics economists Anna Wong and Troy Durie stated, "CPI tends to rise in January as firms often implement price increases at the start of the year. But this January, core CPI was noticeably softer than typical for the month. While some hotspots remain, there are strong disinflationary forces in autos, food, and energy. Overall, we believe disinflationary pressures will dominate in the coming months."

Following the CPI release, traders' expectations for total rate cuts this year increased to 63 basis points from 58 basis points on Thursday, implying a 50% chance of three cuts by year-end. The market sees a 30% probability of a cut in April and over 80% for June. Inflation swap markets suggest traders expect CPI to peak around mid-year before declining, consistent with expectations for the Fed to begin cutting rates around June or July.

Some institutional analysis points out that despite the favorable combination of slowing inflation and a robust labor market, the Fed faces a delicate balancing act in the final months of Chair Powell's term: it must continue to restrain inflation without harming the labor market.

Looking ahead at the Fed's policy path, Wall Street analysis suggests that while the Fed's 2% inflation target is primarily based on the PCE price index, both CPI and PCE remain above target. Against a backdrop of a stabilizing labor market, the Fed is likely to keep rates unchanged for some time.

Lindsay Rosner, Head of Multi-Sector Fixed Income Investing at Goldman Sachs Asset Management, stated that given the January CPI data was not as strong as feared, the path for "normalizing" rate cuts appears clearer. This will depend on continued signs of improvement in the job market, as the Fed is highly sensitive to labor market weakness. She expects two rate cuts this year, with the next likely in June.

Jonny Fine, Global Head of Investment Grade Credit at Goldman Sachs, offered a more aggressive forecast, anticipating four rate cuts this year, beginning in June, with subsequent cuts phased in until the end of 2026. Fine also expects the U.S. 10-year Treasury yield could fall to 3.5% later this year, a more dovish outlook than some of his colleagues. He attributes his dovish stance to the upcoming leadership change at the Fed, explaining that with a potential new Chair, he believes "the Fed will adopt a more forward-looking stance in its policy decisions."

Tiffany Wilding, an economist at PIMCO, described the inflation report as "quite encouraging on the surface," highlighting two positive developments: the ongoing slowdown in persistently rising housing costs, and the fading impact of tariffs. As these trends diminish, the Fed should become more comfortable cutting rates, and two additional cuts this year seem reasonable.

Mohamed El-Erian, Chief Economic Advisor at Allianz, noted that the U.S. core CPI data matched consensus expectations perfectly, while the headline figure was slightly below expectations, which is good news. However, a less optimistic point is that, as other inflation measures show, the U.S. economy has now entered its sixth consecutive year with inflation persistently above the Fed's target.