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US CPI Surges to 3.5%, Bitcoin Tumbles Amid Inflation Fears

Bitcoin dips as March's US CPI data reveals inflation spike to 3.5%.

Thu, 11 Apr 2024, 09:49 am UTC

In a striking development, the US CPI for March soared to 3.5%, exceeding forecasts and intensifying inflation concerns. This uptick has notably influenced Bitcoin's trajectory, leading to a sharp decline as investors reassess the cryptocurrency's stability against persistently high inflation rates.

Inflation Heats Up: March CPI Surpasses Expectations, Shifting Rate Cut Outlook

According to CoinGape, the US Bureau of Labor Statistics released the much-anticipated Consumer Price Index (CPI) inflation data for March, which showed a hotter-than-expected result after the inflation print came in at 3.5%. This compares with analyst expectations of 3.4% and the previous month's inflation rate of 3.2%. The March inflation figure was significant for financial markets in determining the Fed's rate cut trajectory.

Following two consecutive months of disappointing inflation data in January and February, bets on the Fed's first-rate cuts shifted from June to September. Today's data reinforces that the Federal Reserve's widely anticipated 2% inflation rate still needs to be revised. The data also indicated that interest rates may remain higher until the Fed begins its rate-cutting journey.

March CPI Data Reflects Steady Inflation Amidst Adjusting Federal Rate Cut Expectations

According to US CPI data, the Consumer Price Index for All Urban Consumers (CPI-U) increased by 0.4 percent in March on a seasonally adjusted basis, matching the increase seen in February. Before seasonal adjustment, the all-items index increased by 3.5% over the previous 12 months.

At the same time as last month, annual core CPI inflation remained stable at 3.8%. According to the March report, the United States is still experiencing a slow deflation process despite its high inflation rate.

On average, analysts expected the core CPI to rise 0.3% monthly. According to Reuters, analysts expected headline inflation to rise from 3.2% in February to 3.4% year on year. The core number, which excludes volatile items such as food and energy, was expected to fall to 3.7% year on year from 3.8% in February.

Since the beginning of the year, investors have tried to predict the Fed's rate-cutting path. In December 2023, market participants predicted three rate cuts for the year. However, data indicating otherwise has shifted expectations, with mixed signals indicating that the first-rate cut may take some time.

Bets on a rate cut in June and July have been called off for now. However, investors remain optimistic about September, with the CME FedWatch Tool indicating a more than 45% chance of a rate cut.

Bitcoin Reels Under Inflation Woes: CPI Surge Triggers Market Uncertainty

As financial markets grappled with disappointing inflation data, Bitcoin prices fell below critical levels, indicating market turbulence. At press time, Bitcoin cost $67,721.59, down nearly 4.3% from the previous day.

The US CPI data has also raised concerns about further declines in Bitcoin prices. However, in such a situation, traders can view Bitcoin as an inflation hedge while the stock market remains volatile.

As previously reported by CoinGape, Markus Thielen predicted that ETH's price would fall below $3,100 due to low trading volume, while BTC's price would return to $62,000 due to halving-related volatility. Traders should closely monitor Ethereum's critical levels of $3,460 and Bitcoin's $68,330 for further indications.

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