U.S. CPI Up 0.3%, Bitcoin Climbs to $63.7K Amid Easing Inflation

April CPI rises 0.3%, hinting at easing inflation and boosting Bitcoin to $63.7K as Fed rate cut expectations grow.

By Athena Xu

5/15, 09:01 EDT
Bitcoin / U.S. dollar

Key Takeaway

  • U.S. CPI rose less than expected at 0.3% in April, signaling easing inflation and influencing a rise in Bitcoin to $63,700.
  • Despite softer inflation, the Fed's rate cut expectations remain low with only a 50% chance for September, as per CME FedWatch Tool.
  • Soft inflation and flat retail sales data led to positive market reactions: S&P 500 futures up 0.5%, and the 10-year Treasury yield fell seven basis points.

Inflation Trends and Crypto Response

April's Consumer Price Index (CPI) report revealed a slight easing in inflation, with a 0.3% rise compared to the 0.4% increase in March and against economist forecasts also pegged at 0.4%. This moderation in inflation was mirrored in the core CPI, which excludes volatile food and energy costs, marking a 0.3% increase for April, aligning with estimates and showing a decrease from March's 0.4%. Year-over-year, CPI saw a 3.4% increase, matching expectations but presenting a slight decrease from March's 3.5%. Similarly, the core CPI year-over-year rose by 3.6%, consistent with forecasts and down from the previous month's 3.8%. This data, indicating a consistent slide in inflation, had a notable impact on the cryptocurrency market, with Bitcoin's price jumping more than 1% to $63,700 shortly after the report's release.

Economic Indicators and Market Movements

The release of the CPI data coincided with April's retail sales figures, which showed a flat reading against forecasts for a 0.4% rise, and a decrease from March's 0.6%. Retail sales excluding autos rose by 0.2% in April, meeting expectations but falling from March's 0.9%. These economic indicators contributed to a positive reaction in traditional markets, with S&P 500 futures climbing 0.5% and the 10-year Treasury yield dropping seven basis points to 4.37%. The U.S. dollar index saw a 0.5% decrease, while gold prices increased by 0.7%. This broader market response, including the uptick in Bitcoin's price, reflects investor sentiment that the Federal Reserve might adopt a more accommodative monetary policy stance in the near future.

Federal Reserve and Future Rate Cuts

The anticipation surrounding the Federal Reserve's monetary policy was significantly influenced by the CPI report. Prior to the release, the odds of a summer rate cut by the Fed were low, with traders pricing in just a 50% chance of a move in September, as per the CME FedWatch Tool. However, the softer inflation data has raised expectations for potential rate cuts, with Fed funds futures trading data suggesting a 51.7% likelihood of the U.S. central bank easing rates at its September meeting, up from Tuesday’s 44.9% chance. This shift in expectations is crucial for the crypto market, as lower interest rates could potentially drive more investment into riskier assets like cryptocurrencies.