U.S. inflation fell marginally in April, coming in below the expected value, according to the Bureau of Labor Statistics.
The headline Consumer Price Index (CPI) rose by 0.2% month-on-month, against the projected 0.3%. On a year-on-year basis, the inflation also went against economists’ forecasts, from the projected CPI of 2.4% to 2.3%, indicating a less inflationary scenario than previously imagined.
The core CPI, which excludes food and energy, rose 0.2% in April(MoM). However, the year-on-year core CPI remained steady at 2.8%, higher than the Federal Reserve’s 2% target. These numbers have renewed calls for the Fed to lower interest rates, a move that could support assets such as Bitcoin and altcoins. Bitcoin and Ethereum, which trade at $103,693 and $2,548, respectively, maintained their position after the announcement of the data.
The cryptocurrency market was little affected following the announcements, with the total market capitalization remaining at $3.3 trillion. Analysts often view Bitcoin’s performance as an indicator of the broader market’s volatility. As trade tensions calmed, investors are trying to glean hints concerning the future trajectory of interest rates and their implications for the crypto market.
Federal Reserve had kept the rates the same but warned that with the introduction of tariffs, inflation can rise. In the statements made by Fed Chair Jerome Powell, the bank would observe the effects of the tariffs before making any decisions. The central bank’s stance on inflation and tariffs continues to shape market sentiment, especially for assets such as bitcoin, which tends to do well in a lower-interest landscape.
Wall Street experts had noted that anticipations of a rate cut have diminished recently. Economist Jim Bianco highlighted that the possibilities of a June rate reduction are now slimmer at 8%. The likelihoods for a July cut now stand at 35%, whereas September’s rate cut has seen a reduction from 100% to 66%.
If inflation drops further and tariffs are eliminated, then a rate cut can occur as early as July. Bitcoin has historically performed better when the interest rate was reduced or a rate cut was anticipated, as evident during the pandemic and again in 2023.
