The US inflation rate dropped slightly in March, with the core indicator steadily rising, as the Consumer Price Index (CPI) fell 0.1% and core CPI rose 0.1%, beating expectations.
The Consumer Price Index (CPI) fell 0.1% in March, beating economists’ expectations of a 0.1% increase. This modest decline marks the first time the headline level has decreased since January.
The Core CPI: A More Stable Indicator
Core Consumer Price Index (CPI) measures the change in prices of essential goods and services, excluding food and energy.
It provides a more stable indicator of inflation than the headline CPI.
The core CPI accounts for around 80% of the overall CPI weight, making it a crucial metric for central banks to assess price stability.
Core CPI is often used as a leading indicator of future inflation trends.
Core CPI, which strips out volatile food and energy prices, rose only 0.1% in March against forecasts of 0.3%. ‘The numbers are a bit confusing,’ said one economist. ‘We were expecting a higher increase.’
Core CPI climbed to a year-over-year rate of 2.8%, significantly lower than the expected 3%. This reading is also lower than February‘s 0.2% increase.
Market Reactions
The price of bitcoin (BTC) rose modestly following the news, reaching above $82,000 in the minutes after the announcement. However, U.S. stock index futures are under pressure on Thursday morning, with the Nasdaq 100 down 2.7% and the S&P 500 up 2.1%.
The recent surge in bitcoin’s price can be attributed to the market’s reaction to the CPI data, which was released prior to ‘Liberation Day‘ sweeping tariff announcements last week by President Trump.
Rate Cut Hopes
Prior to the release of the CPI data, traders had been pricing in a rate cut at the Fed’s next meeting in May. However, with the recent news, those odds have been reduced to just 17%. For now, June is looking like the action meeting, with a 75% chance of 25 basis points or more of rate cuts by the end of that event.
A Federal Reserve rate cut is a decrease in interest rates set by the Federal Reserve to stimulate economic growth.
This action injects liquidity into the market, making borrowing cheaper and increasing consumer spending.
The Fed uses monetary policy tools, including cutting short-term interest rates, buying government bonds, or implementing quantitative easing.
A rate cut can boost employment, inflation, and overall economic activity.
However, it also carries risks of asset bubbles and inflationary pressures if not managed carefully.
Looking Ahead
Attention turns to Friday’s Producer Price Index (PPI) report, which may further shape expectations for Fed policy in May. The upcoming PPI data will provide valuable insights into inflationary pressures and their impact on monetary policy decisions.
The Producer Price Index (PPI) is a measure of inflation that tracks the average change in prices received by domestic producers for their goods and services.
It is an important indicator of inflationary pressures on businesses and can influence monetary policy decisions.
The US Bureau of Labor Statistics releases PPI data monthly, which includes indexes for various commodity groups such as food, energy, and durable goods.
A high PPI reading indicates rising production costs, while a low reading suggests decreasing costs.
- coindesk.com | U.S. CPI Declined in March; Core Rate Rose Just 0.1%.
