The US inflation data once again disappoints, with the Consumer Price Index (CPI) in March rising higher than expected, dampening expectations that the Federal Reserve (Fed) will cut interest rates at some point this summer.
In March, the CPI increased by 0.4% compared to the expected 0.3% and the 0.4% in February. Compared to the same period last year, the CPI has risen by 3.5% compared to the expected 3.4% and 3.2% in February.
The core CPI, which excludes food and energy costs, rose by 0.4% in March compared to the predicted 0.3% and the 0.4% in the previous month. Compared to the same period last year, the core CPI has increased by 3.8% compared to the expected 3.7% and 3.8% in February.
The price of Bitcoin dropped by over 4% to $67,638 within an hour after the report.
Traditional markets are also not optimistic, with S&P 500 and Nasdaq 100 futures contracts both dropping by about 1.5%. The yield on the 10-year US Treasury bond rose by 13 basis points to 4.5%, and the dollar index increased by 0.5%. Gold fell by 0.5% to $2,352 per ounce.
In addition to Bitcoin ETFs and the halving event, the expected looser monetary policy of the United States is expected to be one of the catalysts for Bitcoin’s price increase in 2024. The market has priced in about 5 or 6 Fed interest rate cuts for 2024, but inflation, which steadily decreased in most of 2022 and 2023, has not cooperated. It actually increased slightly in the first quarter and remains much higher than the US central bank’s 2% target.
A number of Fed members have made it clear that the central bank is not inclined to start loosening monetary policy until it sees a sustainable path, meaning more than one monthly report on cooling inflation trends. Meanwhile, traders have quickly reduced expectations for interest rate cuts and prior to today’s report, priced in only two or three cuts for the year, with the first move expected to take place in June or July.
