LATEST US INFLATION DATA: CPI Drops, Bitcoin and Stock Markets React
The latest release of the Consumer Price Index (CPI) in the United States has taken economists by surprise. In March, inflation fell by 0.1%, compared to the anticipated modest increase of 0.1%. This represents a stark contrast to the 0.2% rise recorded in February. On an annual basis, the overall index only increased by 2.4%, well below the expected 2.6% and the previous month’s 2.8%.
The underlying inflation, which excludes volatile components such as energy and food, also showed modest growth: +0.1% for the month, less than the expected +0.3%. On an annual basis, this component stands at 2.8%, again lower than the forecasts (3%) and the February figure (3.1%).
MARKET REACTION: BTC Hesitates
Financial markets initially reacted positively to these figures. Bitcoin briefly surged above $82,500 after the release of the report, before falling back below $81,000, in line with the correction in US stock indices. The Nasdaq 100 and the S&P 500 opened significantly lower, down 2.7% and 2.9% respectively, ending the recovery that had begun the previous day.
This slight back and forth movement of Bitcoin illustrates the volatility of the current situation. On one hand, decreasing inflation could justify monetary easing by the Federal Reserve. On the other, geopolitical uncertainties and the turbulence caused by American trade policy keep volatility at a high level.
FEDERAL RESERVE FACES MONETARY DILEMMA
The publication of the CPI index precedes the Producer Price Index (PPI), which is expected on Friday, and comes at a time of heightened political tension. Last week, President Trump announced a series of tariff hikes on what he himself dubbed ‘Liberation Day,’ triggering shockwaves in the markets. Although a 90-day pause has been declared since then, uncertainty remains regarding the future of international trade.
Prior to the release of the CPI index, the markets estimated just a 17% probability of a rate cut at the Fed meeting in May. Attention now turns to the June meeting, where traders are pricing in a 75% chance of monetary easing of at least 0.25%.
POSSIBLE MONETARY STRATEGY RECALIBRATION
The significant slowdown in inflation could reignite hopes of a Fed pivot, but the institution is faced with a complex equation. If the pace of disinflation is confirmed with the PPI, it would strengthen the argument for rate adjustments. However, trade tensions and market volatility limit the maneuverability of the monetary authority.
