US CPI In March Soars To 3.5%, Fed Rate Cut Prospects Decline

Key Points:

• US CPI in March exceeded expectations, with inflation reaching 3.5%, raising concerns about inflationary pressures.
• The data suggests that the Federal Reserve may delay interest rate cuts, as achieving the target 2% inflation rate remains challenging.
• Cryptocurrency prices, including Bitcoin and Ethereum, dipped following the announcement.

The Consumer Price Index (CPI) for March surged at a pace that exceeded expectations, amplifying concerns about inflation and dimming prospects for imminent interest rate cuts by the Federal Reserve.

US CPI In March Surges: Inflation Exceeds Expectations

According to data released by the Bureau of Labor Statistics, the US CPI in March rose by 3.5%, outstripping analysts’ forecasts of 3.4% and surpassing the previous month’s figure of 3.2%. The report, eagerly awaited by financial markets, held significant implications for the trajectory of the Fed’s rate adjustments.

Both the headline and core CPI, which excludes volatile food and energy prices, saw increases of 0.4%, slightly higher than anticipated. This marked the third consecutive month of 0.4% readings for the core CPI, the strongest such streak since early last year. On a year-on-year basis, the headline CPI accelerated to 3.5%, while the core CPI held steady at 3.8%, surpassing economists’ projections.

Following disappointing inflation data in January and February, expectations for the timing of Fed rate cuts had shifted from June to September. The latest US CPI in March reinforces the notion that achieving the Fed’s target of 2% inflation remains elusive. Consequently, the likelihood of interest rates staying elevated for an extended period has increased, delaying any potential rate-cutting measures by the Fed.

Bitcoin and Ethereum Decline Following CPI Data

The prospect of easier U.S. monetary policy had been anticipated as one of the bullish catalysts for cryptocurrencies like Bitcoin in 2024. Market sentiment at the start of the year had priced in approximately 5 or 6 Federal Reserve rate cuts for 2024.

Following the announcement of the CPI data, both Bitcoin and Ethereum experienced declines of over 2%. Bitcoin’s price dipped below $68,000, while Ethereum’s price hovered close to $3,500.