US CPI Comes In Hot

With inflation coming in above expectations, any remaining hope of a March rate cut will be dashed.

How will the CPI print impact the crypto markets?

Today's CPI print shows that US inflation is proving tricky to bring under control.

  • CPI 0.3% MoM (expected 0.2%)
  • CPI Core 0.4% (expected 0.3%)
  • CPI 3.1% YoY (expected 2.9%)
  • CPI Core 3.9% (expected 3.7%)

The hoped-for print of 2.9% for the headline figure would have been the first time that inflation has fallen below 3% in almost three years, but it was not to be.

Market Reaction

The DXY moved without clear direction before the announcement, and Monday saw low liquidity in the forex markets as traders waited for further cues.

Today's CPI print is big news, following the Federal Reserve's last messaging, post-FOMC. Jay Powell made a point of taking a March interest rate cut off the table, aiming to adjust the market's expectations and put off hope of easing until "mid-year". The expectation is currently that the first of four quarter-point rate cuts this year will take place in May.

Had CPI fallen more rapidly, this might have changed the calculus in favor of an earlier cut. As things stand, this may now place the anticipated May cut in doubt.

As we know, Bitcoin is acutely sensitive to these events. Risk assets, including stocks, benefit from cheaper money, so any hint that interest rates are about to fall typically sends markets surging. Conversely, tighter policy or "higher for longer" is a headwind to risk.

Following the data's release, bitcoin immediately dropped by $500, as the DXY strengthened. However, these events always take a little time to shake out in the markets, so the full effects will not be known for some time yet.

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