The US Bureau of Labor Statistics (BLS) will publish the February Consumer Price Index (CPI) data on Wednesday. The report is expected to show a stabilization in inflation, still above the Federal Reserve’s (Fed) 2% target.

The monthly CPI is forecast to rise 0.3%, following the 0.2% increase recorded in January, while the annualized reading is seen holding steady at 2.4%. Core CPI figures, which exclude volatile food and energy prices, are expected to come in at 0.2% and 2.5%, on a monthly and yearly basis respectively.

Although inflation data is critical for Fed officials when deciding on the next policy step, the market reaction could remain muted due to the fact that the February CPI prints won’t reflect the impact of rising crude Oil prices on inflation. After the United States (US) and Israel launched a joint military operation against Iran on February 28, the barrel of West Texas Intermediate (WTI) rose sharply from about $67 to above-$110 before correcting lower.

What to expect in the next CPI data report?

CPI figures for February are unlikely to diverge significantly from market expectations. In the past six releases, monthly core CPI readings were either 0.2% or 0.3%. Similarly, CPI was up either 0.2% or 0.3% on a monthly basis in this time frame, with the exception of a 0.4% increase recorded in August, 2025.

The Institute for Supply Management’s (ISM) Purchasing Managers’ Index (PMI) reports painted a mixed picture in regard to input price pressures in the private sector. The Prices Paid Index component of the Manufacturing PMI survey jumped to 70.5 in February from 59 in January, while the Prices Paid Index of the Services PMI survey declined to 63 from 66.6.

Previewing the inflation data, “the February CPI report this week should begin to show a moderation in services inflation that will help build confidence for the FOMC”, said TD Securities analysts.

“Core CPI likely moderated in February to 0.23% m/m owing to a slower rise in services along with more modest tariff pass-through. We look for the headline to accelerate to 0.25% m/m as energy prices rebounded. Our forecast translates to 2.5% and 2.4% y/y for core and headline, respectively,” they explained.

How could the US Consumer Price Index report affect EUR/USD?

Markets virtually see no chance of a Fed interest rate cut in March and only price in about a 12% probability of a 25 basis-points (bps) reduction in April, according to the CME FedWatch Tool. The odds of a fourth consecutive policy hold in June, after the central bank decided to keep interest rates unchanged in January, climbed to nearly 70% in the first few days after the US-Iran war started. Disappointing labor market data, which showed a decrease of 92,000 in Nonfarm Payrolls in February, and easing crude Oil prices, however, dragged that probability back below 60%.

A significant negative surprise in the monthly core CPI print, a reading at or below 0%, could cause investors to reassess the odds of a rate cut in June and cause the US Dollar (USD) to come under selling pressure with the immediate reaction. Conversely, a reading above 0.3% in this data could boost the USD by casting doubt on a policy-easing step in June.

Still, investors could refrain from taking large positions based on this data alone, given the uncertainty surrounding the inflation outlook from March on because of the volatility in energy prices caused by the US-Iran war.

Eren Sengezer, FXStreet European Session Lead Analyst, shares a brief technical outlook for EUR/USD.

“The Relative Strength Index (RSI) indicator on the daily chart rebound from near-30 but stays below 50, suggesting that EUR/USD is yet to complete a bullish reversal. Additionally, the pair remains below the strong 1.1675-1.1700 resistance area, reinforced by the 200-day Simple Moving Average (SMA), the Fibonacci 61.8% retracement of the November-January uptrend and the 100-day SMA.”

“In case EUR/USD fails to reclaim this region, 1.1600-1.1590 (static level, Fibonacci 78.6% retracement) could be seen as the first support area before 1.1500-1.1470 (static level, beginning point of the uptrend). Looking north, technical resistance levels could be spotted at 1.1750 (Fibonacci 50% retracement) and 1.1820 (Fibonacci 38.2% retracement).”

Fed FAQs

Monetary policy in the US is shaped by the Federal Reserve (Fed). The Fed has two mandates: to achieve price stability and foster full employment. Its primary tool to achieve these goals is by adjusting interest rates.
When prices are rising too quickly and inflation is above the Fed’s 2% target, it raises interest rates, increasing borrowing costs throughout the economy. This results in a stronger US Dollar (USD) as it makes the US a more attractive place for international investors to park their money.
When inflation falls below 2% or the Unemployment Rate is too high, the Fed may lower interest rates to encourage borrowing, which weighs on the Greenback.

The Federal Reserve (Fed) holds eight policy meetings a year, where the Federal Open Market Committee (FOMC) assesses economic conditions and makes monetary policy decisions.
The FOMC is attended by twelve Fed officials – the seven members of the Board of Governors, the president of the Federal Reserve Bank of New York, and four of the remaining eleven regional Reserve Bank presidents, who serve one-year terms on a rotating basis.

In extreme situations, the Federal Reserve may resort to a policy named Quantitative Easing (QE). QE is the process by which the Fed substantially increases the flow of credit in a stuck financial system.
It is a non-standard policy measure used during crises or when inflation is extremely low. It was the Fed’s weapon of choice during the Great Financial Crisis in 2008. It involves the Fed printing more Dollars and using them to buy high grade bonds from financial institutions. QE usually weakens the US Dollar.

Quantitative tightening (QT) is the reverse process of QE, whereby the Federal Reserve stops buying bonds from financial institutions and does not reinvest the principal from the bonds it holds maturing, to purchase new bonds. It is usually positive for the value of the US Dollar.