Last month, inflation in the United States actually dipped at the headline level, while the core rate saw only a slight increase. This could reignite discussions around whether the Federal Reserve will consider a rate reduction at its upcoming meeting in May.
The Consumer Price Index (CPI) decreased by 0.1% in March, contrasting with economists’ predictions of a 0.1% rise after a 0.2% increase in February. On a year-over-year basis, the headline CPI rose just 2.4%, against anticipated forecasts of 2.6% and February’s 2.8%.
Core CPI, which excludes fluctuating food and energy prices, increased merely 0.1% in March, again below the forecasted 0.3% and February’s 0.2%. Year-over-year, core CPI climbed 2.8%, falling short of the anticipated 3% and February’s 3.1% increase.
In the wake of this news, bitcoin (BTC) experienced a modest uptick, crossing the $82,000 mark. Following a significant surge the prior day, U.S. stock index futures displayed weakness on Thursday morning, with the Nasdaq 100 down 2.7% and the S&P 500 down 2.1%.
The CPI report shared on Thursday reflects data collected before President Trump made sweeping tariff announcements on “Liberation Day” last week, which prompted a multi-day market panic that saw some recovery the day after following the president’s announcement of a 90-day pause.
Before the tariff-related pause and subsequent market recovery, traders were active in factoring in a rate cut at the Fed’s next meeting in May. However, shortly before the CPI release, those chances shrank to just 17%. Currently, June appears to be the more pivotal meeting, with a 75% probability of a rate cut of 25 basis points or more by then.
Looking further, attention now shifts to Friday’s Producer Price Index (PPI) report, which could influence Fed policy expectations in May.