Investors have turned their attention to the release of US inflation data, driven by concerns that inflation might surpass expectations. Although Federal Reserve Chairman Powell’s recent statements were somewhat dovish, they still hinted at potential upcoming challenges. Investors are particularly nervous about the possibility of inflation exceeding forecasts once again.
How Will Interest Rates Be Affected?
During his recent remarks, Fed Chairman Powell suggested that interest rates might remain at their peak for an extended period if necessary. Some Fed members went a step further, indicating that the neutral interest rate might have increased. This has led to fears of additional rate hikes, even as many anticipate the beginning of rate cuts.
What Are the New Expectations?
The expectation for the first rate cut, which was initially set for March, has now been postponed until September. Consequently, the market’s anticipated 150 basis points cut has been reduced significantly. The current market expectation for a rate cut in September has now decreased to 50 basis points.
Given this context, the April inflation data was crucial in assessing the Fed’s tight monetary policy. The headline inflation expectation for April was 3.4%, compared to 3.5% the previous month. For core inflation, the expectation was 3.6%, with the prior month’s figure at 3.8%.
Key Takeaways for Investors
– US Inflation Announced: 3.4% (Expectation: 3.4%, Previous: 3.5%)
– US Core Inflation Announced: 3.6% (Expectation: 3.6%, Previous: 3.8%)
The release of the US inflation data had a positive impact on the cryptocurrency markets, leading to an increase in BTC prices.