The consumer price index (CPI) report scheduled for Wednesday marks the first under President Trump’s administration, showcasing potential signs of inflation easing that could bolster investor confidence in risk assets, which have faced prior setbacks. By forecasting a decline in year-over-year inflation to 2.9%, down from 3%, and core inflation expected to decrease by 0.1 percentage point to 3.2%, the Bureau of Labor Statistics may provide a favorable outlook.

Moreover, any unexpected rise in the CPI could maintain elevated interest rates, thereby making riskier investments less appealing. The S&P 500 index, having fallen nearly 10% from record heights, alongside bitcoin (BTC) declining by roughly 30% to around $80,000, illustrates the current market volatility.

Both Trump and Treasury Secretary Scott Bessent underscored the importance of lowering 10-year Treasury yields to decrease the federal funds rate, a strategy seemingly bearing fruit as yields have moderated from 4.8% to 4.2%. In parallel, the dollar index has weakened to below 104, aligning with economic plans put forth by the administration, as evidenced by the Truflation Index marking 1.35%, its lowest since September 2020.

The Federal Open Market Committee is expected to maintain the federal funds rate at a range of 4.25%-4.50% during their meeting on March 18-19. Investors remain vigilant ahead of the inflation report, as a lower-than-expected reading could trigger rate cuts, whereas a significantly higher reading may prolong elevated rates and further pressure risk assets.