The inflation rate in the U.S. decreased on the headline front last month, while the core rate saw only a slight increase. This may reignite discussions on whether the Federal Reserve will consider lowering rates in its upcoming meeting in May.
In March, the Consumer Price Index (CPI) dropped by 0.1%. Economists had predicted a 0.1% rise following February’s 0.2% increase. Year-over-year, the headline CPI grew by just 2.4%, falling short of the expected 2.6% and down from February’s 2.8%.
The Core CPI, which excludes the fluctuating prices of food and energy, rose by only 0.1% in March, compared to the forecasted 0.3% and February’s 0.2%. The year-over-year increase in Core CPI was 2.8%, significantly below the anticipated 3% and February’s 3.1%.
In response to the news, the price of Bitcoin (BTC) experienced a modest bump, surpassing $82,000. Following yesterday’s significant gains, U.S. stock index futures faced downward pressure this Thursday morning, with the Nasdaq 100 at -2.7% and the S&P 500 at -2.1%.
It’s important to note that Thursday morning’s CPI report reflects data collected before President Trump’s recent “Liberation Day” tariff announcements, which initially caused a market panic, a part of which was mitigated yesterday after the announcement of a 90-day pause on tariffs.
Before the tariff pause and market recovery, traders had been actively anticipating a rate cut in the Fed’s upcoming May meeting. However, shortly before the CPI data was released, the likelihood of such a cut was reduced to just 17%. As it stands, June appears to be the likely candidate for action, with a 75% chance of a 25 basis point reduction or more by the end of that meeting.
Looking forward, all eyes are now on Friday’s Producer Price Index (PPI) report, which could influence expectations for Federal Reserve policy in May.
