Inflation data has once again surprised analysts, with the Consumer Price Index (CPI) for March exceeding expectations and raising doubts about the possibility of a Fed rate cut later this summer.
The CPI for March increased by 0.4%, compared to the anticipated 0.3%, and matched February’s 0.4% rise. On a year-over-year basis, CPI rose by 3.5%, surpassing the expected 3.4% and February’s 3.2%.
The core CPI, which excludes food and energy costs, also rose by 0.4% in March, higher than the anticipated 0.3%, and consistent with the previous month’s increase. Year-over-year core CPI was up by 3.8%, exceeding the expected 3.7% and matching February’s 3.8%.
Following the release of the report, the price of bitcoin (BTC) dropped by more than 1% to $68,200. Traditional markets also reacted negatively, with S&P 500 and Nasdaq 100 futures both declining by about 1.5%. The 10-year U.S. Treasury yield surged by 13 basis points to 4.50%, and the dollar index rose by a substantial 0.5%. Additionally, gold, which has been reaching new record highs almost daily, fell by 0.5% to $2,352 per ounce.
Earlier predictions had anticipated easier U.S. monetary policy as a bullish catalyst for bitcoin in 2024, alongside spot ETFs and the halving. However, with inflation rising through the first quarter and remaining well above the U.S. central bank’s 2% target, expectations of multiple Federal Reserve rate cuts have diminished.
Several Fed members have indicated that they are not inclined to ease monetary policy until they observe a sustained downward trend in inflation, extending beyond just one monthly report. Prior to this morning’s inflation report, traders had priced in only two or three rate cuts for the full year, according to the CME FedWatch Tool, with the first expected move in June or July. However, following the new inflation data, the tool now suggests that September is the most likely time for an initial rate cut.