In March, the Consumer Price Index (CPI) inflation data from the U.S. Bureau of Labor Statistics surprised analysts by coming in higher than anticipated at a 3.5% increase. This was more than the predicted 3.4% and followed a previous monthly inflation rate of 3.2%. The significant March inflation figure significantly impacted financial markets as it influenced market speculation regarding the Federal Reserve’s future interest rate adjustments.
Following two straight months of underwhelming inflation figures in January and February, predictions for the Federal Reserve’s initial rate reduction have moved from June to September. Today’s new data reinforces the notion that the Fed’s long-anticipated 2% inflation target remains elusive. Moreover, this latest data suggests that rates may stay elevated a bit longer before the Fed initiates its planned series of cuts.
US Inflation Lands Hotter Than Expected
The Consumer Price Index for city-dwelling consumers in the US rose by 0.4% in March after accounting for seasonal variations, matching the same increase as in February. Without adjusting for seasons, the overall price index had risen by 3.5% over the past year.
Last month, the annual core Consumer Price Index (CPI) inflation remained steady at a rate of 3.8%. Simultaneously, the US economy is undergoing a gradual deflationary trend, as indicated in the latest March report, despite the relatively high inflation figure.
On average, analysts predicted a 0.3% increase in the monthly core Consumer Price Index (CPI). Reuters added that experts also anticipated the headline inflation rate to rise from 3.2% in February’s CPI to 3.4% year over year. Regarding the core figure, which excludes unstable elements such as food and energy, analysts forecasted a decrease to 3.7% year over year, down from 3.8% in the previous month.
Fed Rate Cuts Might Take Longer
Since the start of the year, investors have been closely monitoring the Fed’s plans for interest rate cuts. In late 2023, some market observers predicted that three rate cuts would occur throughout the year. However, recent data suggests otherwise, causing uncertainty and conflicting signals about the timing of the first rate cut.
Currently, predictions for interest rate cuts in June and July have been discarded. But there’s optimism among investors regarding a potential rate cut in September. According to the CME FedWatch Tool, the probability of this happening is over 45%.
Bitcoin Price Breaks Key Support Level
In response to disappointing inflation figures, financial markets experienced turmoil, causing Bitcoin prices to drop below significant thresholds. Currently, Bitcoin is priced at $67,721.59, representing a nearly 4.3% decrease in comparison to the previous day’s same time.
Bitcoin investors may see the rising US Consumer Price Index (CPI) as an opportunity to buy, viewing the cryptocurrency as a protective asset against potential inflation. Meanwhile, concerns about equity market instability could keep some traders hesitant.
According to a previous CoinGape article, Markus Thielen predicted that the price of Ethereum could fall below $3,100 due to insufficient trading activity. On the other hand, Bitcoin’s price was expected to rebound to around $62,000 as a result of the bitcoin halving causing market turbulence. Traders should keep an eye on the significant levels for Ethereum at $3,460 and for Bitcoin at $68,330 for additional clues.
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2024-04-10 19:50